After the recent controversial Beecroft Report on employment law reforms, which planned to make it easier for firms to sack under-performing staff, the Government has decided to bring forward the release of its Enterprise and Regulatory Reform Bill.
The Bill contains a number of employment-related measures aimed at creating strong, sustainable and balanced growth in the UK economy. While the proposed changes to compromise agreements, dispute resolution, fines on employers and whistle blowing claims have been widely reported, arguably the most significant measure in the Bill is to give the Secretary of State for Business, Innovation and Skills the power to change the compensatory award for unfair dismissal.
If passed the Bill would give the secretary of state the power to change the maximum compensatory award for unfair dismissal (which is currently £72,300) and instead offer employees three options depending on their contract.
- A specific amount, which must be within one & three times the national median earnings.
- A specified number of weeks’ pay which is at least 52 weeks.
- The lower of the above two figures.
I’m sure you’re aware that employment tribunals have a wide discretion to use compensatory awards to pay employees damages for their loss, based on what is equitable. Tribunals are entitled to look at a wide range of heads of loss including loss of pension rights and loss of immediate and future earnings.
I do have my concerns about this, especially as employers now have the option to revise their offer down to a single multiple of median earnings, meaning lower and mid-level earners would lose out. Unlike the high earners, these employees’ notice periods are less likely to provide significant compensation in themselves, and they would have no other option but to seek help from the unfair dismissal award to cover their additional losses.