Department for Business, Innovation and Skills
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Reforms to job laws to help business
The most radical reform to the employment law system for decades was outlined today by Business Secretary Vince Cable as part of the Government’s plan for growth, cutting unnecessary demands on business while safeguarding workers’ rights.
During a speech to EEF, the manufacturers organisation, Dr Cable announced the results of a consultation on resolving workplace disputes and the Red Tape Challenge review of employment law.
A package of measures will retain key protections for employees, but also fundamentally improve the way employers take people on, manage disputes and let people go. Changes will include an overhaul of employment tribunals, which is expected to deliver £40 million a year in benefits to employers. Ministers will also start a call for evidence on whether the 90 day minimum consultation period for collective redundancies is restricting businesses and should be reduced.
Vince Cable said:
“Our labour market is already one of the most flexible in the world. This flexibility benefits businesses, staff and the wider economy. But many employers still feel that employment law is a barrier to growing their business.
“We’re knocking down that barrier today - getting the state out of the way, making it easier for businesses to take on staff and improving the process for when staff have to be let go.
“But let me be clear: we are not re-balancing employment law simply in the direction of employers. Our proposals strike an appropriate balance and we are keeping the necessary protections already in place to protect employees. Our proposals are not - emphatically not – an attempt to give businesses an easy ride at the expense of their staff. Nor have we made a cynical choice to favour flexibility over fairness.
“We know that disputes at work cost time and money, reduce productivity and can distract employers from the day-to-day running of their business. Tribunals should be a last resort for workplace problems which is why we want disputes to be solved in other ways.”
In response to the suggestion that dismissal laws are too onerous for small businesses in particular, the Government will launch a call for evidence on two proposals.
Firstly it will seek views ona proposal to introduce compensated no fault dismissal for micro firms, with fewer than 10 employees. Secondly, it will look at ways to slim down existing dismissal processes, how they might be simplified, including potentially working with the Advisory, Conciliation and Arbitration Service (Acas) to make changes to their Code, or supplementary guidance for small businesses.
Simplifying the employment tribunals system for businesses will result in fewer claims each year. These reforms will deliver direct net savings to business of more than £10 million a year with wider benefits to employers estimated at more than £40 million a year.
Proposals resulting from the Red Tape Challenge include a call for evidence on the consultation rules for collective redundancies and whether the current 90 day minimum period for more than 100 redundancies can be reduced. Ministers are keen to see what impact this has on the restructuring of businesses, whether this acts as a barrier to employer flexibility in the labour market and how any change might affect employees’ access to alternative employment or training.
The Ministry of Justice will shortly publish a consultation on the introduction of fees for anyone wishing to take a claim to an employment tribunal. The proposals will transfer the cost burden from taxpayers to users of the system and encourage claimants to consider seriously the validity of their claim. The consultation will seek views on two options. The first proposes a system that involves payment of an initial fee to lodge a claim, and a second fee to take that claim to hearing. The second option proposes introducing a £30,000 threshold, so those seeking an award above this level will pay more to bring a claim.
Of the 159 regulations examined in the employment theme of the Red Tape Challenge more than 70 regulations, over 40 per cent, are to be merged, simplified or scrapped. The Government will:
· Publish a call for evidence on proposals to simplify the Transfer of Undertakings (Protection of Employment) - TUPE - rules which many businesses say are too complex and bureaucratic.
· Close a whistleblowing case law loophole which allows employees to blow the whistle about their own personal work contract.
· Merge 17 National Minimum Wage regulations into one set which will simplify the current regime, making it easier for employers to navigate the law, to complement the work the Low Pay Commission is doing on how best to streamline the system.
· Consult in the spring to streamline the current regulatory regime for the recruitment sector.
· Create a universally portable CRB check that can be viewed by employers instantly online, from early 2013. These policy changes are being led by the Home Office.
As part of the response to the Resolving Workplace Disputes consultation, the Government has committed to:
· Requiring all employment disputes to go to the Advisory, Conciliation and Arbitration Service (Acas) to be offered pre-claim conciliation before going to a tribunal and from April 2012 increasing the qualification period for unfair dismissal from one to two years.
· Publishing a consultation in the new year on ‘protected conversations’ which allows employers to discuss issues like retirement or poor performance in an open manner with staff - without this being used in any subsequent tribunal claims.
· Appointing Mr Justice Underhill to lead an independent review of the existing rules of procedure governing employment tribunals. This review will look to address concerns that they have become increasingly complex and inefficient over time and are no longer fit for purpose.
· A further consultation on measures to simplify compromise agreements, which will be renamed ‘settlement agreements’. A compromise agreement is a type of employment contract, which means when the working relationship has broken down to an irretrievable status, employees receive a negotiated financial sum to end their contract, and agree to not bring further claims against their employer.
· Announcing plans to consider how and whether to develop a ‘rapid resolution’ scheme which will offer a quicker and cheaper alternative to determination at an employment tribunal. Any proposals would be the subject of a consultation.
· Modifying the formulae for up-rating employment tribunal awards and statutory redundancy payments to round to the nearest pound. We anticipate that the reduction in redundancy pay and subsequent reduction in associated compensation payments made in employment tribunals will have a direct net saving to business of £5.4. million each year.
Some of these changes will require the Government to introduce primary legislation, subject to the Parliamentary timetable.
Notes to editors:
1. A copy of Vince Cable’s speech can be found at www.bis.gov.uk
2. The Government response to the ‘Resolving Workplace Disputes’ consultation can be found at http://www.bis.gov.uk/Consultations/resolving-workplace-disputes . The ‘Resolving Workplace Disputes’ consultation was launched on the 27 January and closed on 20 April.
3. The Calls for Evidence on collective redundancies consultations and TUPE can be found at http://www.bis.gov.uk/assets/biscore/employment-matters/docs/c/11-1371-call-for-evidence-collective-redundancies and http://www.bis.gov.uk/assets/biscore/employment-matters/docs/c/11-1376-call-for-evidence-effectiveness-of-tupe-regulations They will end on 31 January 2012.
4. The spotlight for the Red Tape Challenge ran from 10 October to 31 October. Of the 159 regulations in the employment theme over 70 regulations (over 40%) are to be merged, simplified or scrapped.
5. There were 218,000 tribunal claims in 2010-11, a rise of 44% since 2008-09, with each business spending nearly £4,000 per claim on average defending itself. There is an additional average cost of a £1,900 to the taxpayer per claim.
6. From April 2012 witness statements will be taken as read, expenses are to be withdrawn for witnesses and judges are to sit alone for unfair dismissal claims – all of which are designed to lower costs and speed up tribunal claims.
7. In addition, the maximum level for cost awards to businesses in winning a vexatious tribunal claim is to rise from £10,000 to £20,000. Deposit order amounts for claimants, when a judge determines that a part of claim in unmerited, will rise from £500 to £1,000.
8. Currently only a small number of employees with a potential claim contact Acas. Of those that do, and are referred into pre-claim conciliation (PCC), less than 30% go on to lodge Tribunal claims. Effectively extending pre-claim conciliation to all potential claimants could offer significant savings to employers through early resolution, and may help discourage speculative, weak or vexatious claims
9. The terms of reference for Mr Justice Underhill’s review can be found at. http://www.bis.gov.uk/assets/biscore/employment-matters/docs/t/11-1379-terms-for-review-employment-tribunal-rules . Mr Justice Underhill will present his findings to Ministers next year.
10. The Employment Law Review is a Parliament long review looking at all aspects of employment law and is part of the Government's plans to deliver growth by breaking down barriers, boosting opportunities and creating the right conditions for businesses to start up and thrive. Since the review was announced last summer the Government has:
o launched an Employer’s Charter that reassures employers about what they can already do to deal with staff issues in the workplace
o launched a review of the compliance and enforcement regimes for employment law, with the aim of streamlining the system removed the Default Retirement Age, thus removing significant paperwork obligations for employers and bringing wider benefits to the economy, making it easier for older people to continue working
o commissioned an independent review jointly with DWP (from David Frost and Dame Carol Black) of the system for managing sickness absence
o repealed the planned extension of the right to request flexible working to parents of 17 year olds
o decided not to bring forward the dual discrimination provision in the Equality Act
o not extended the right to request time to train to companies with fewer than 250 staff.
11. A recently published labour market discussion paper entitled, ‘Flexible, effective, fair: Promoting economic growth through a strong and efficient labour market,’ can be found at http://www.bis.gov.uk/assets/biscore/employment-matters/docs/F/11-1308-flexible-effective-fair-labour-market
12. BIS's online newsroom contains the latest press notices, speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.
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