Government proposes pay cap for unfair dismissal awards

The government has published its proposals to reduce the number of workplace disputes that end up at employment tribunals.

The proposals, which were announced by employment relations minister Jo Swinson, include the introduction of a 12-month pay cap on the compensatory award for unfair dismissal, as well as the establishment of a new statutory code and guidance to encourage the use of settlement agreements.

Its proposals are in response to the Ending the employment relationship consultation, which was published in September 2012.

Swinson said: “We are committed to finding ways to support both employers and employees when a working relationship breaks down. The measures I have announced today will do just that.

“Employment tribunals are costly for everyone, in terms of money, but also time and stress. We need to tackle unrealistic expectations about the levels of compensation awards, especially when only one in 350 people who make a claim for unfair dismissal receive an award of more than their own salary, and the average award is less than £5,000. Tribunals should be the last resort, not the first port of call.”

The government has also launched three consultations on proposals to reform the Transfer of Undertakings (Protection of Employment) (Tupe), which will run until 11 April 2013; early conciliation; and reforms of the regulatory framework for employment agencies and employment businesses.