Plans for greater
business flexibility and quicker resolution for workplace disputes
are to be announced later today by the Business Secretary, Vince Cable.
In his opening speech at the second reading of the Enterprise and
Regulatory Reform Bill, the Business Secretary will set out the
Government’s plans to introduce a measure to boost business
confidence and ease the handling of workplace disputes through
facilitating the use of settlement agreements between employers
Under these measures, employers will be able to offer
settlement agreements before a formal dispute arises and will be
legally protected from this offer being used as evidence in an
unfair dismissal tribunal case. Employees will also continue to
enjoy full protection of their employment rights, as they can
choose to reject the offer of a settlement agreement and proceed
to a tribunal. Evidence from the private sector shows that a
sensible compromise can be reached in the majority of cases.
Business Secretary Vince Cable said:
“This Bill is an important part of this Government’s plan for
long-term growth: fostering enterprise, supporting business and
“Settlement agreements are smart, fair and pro-business
reforms which deliver results for employees and employers. It
empowers employers by enabling them to keep their workforce
flexible and encouraging alternative ways of solving workplace
problems rather than resorting to a tribunal. But crucially it
does so in a way that keeps the necessary protections for
employees in place.
“Our proposed measures and guidance will achieve this
objective. Making this approach simple to use will encourage
employers to take on staff in the knowledge this there is an
effective mechanism for dealing with serious problems if they occur.
“We have spent time ensuring we have got this measure right
and I truly believe this a smart confidence boosting measure for business.”
Employment Relations Minister Norman Lamb said:
“There are inevitably occasions when the employment
relationship doesn't work out. Employers have to feel
confident in dealing with situations such as where an employee
isn't pulling their weight or where someone is unreliable
or even guilty of misconduct.
“In these instances it is sometimes in the best interests of
both employee and employer to end the relationship speedily by
reaching a settlement. An employee leaving by agreement can do so
with their dignity intact. The employer secures peace of mind
knowing that they will not face expensive tribunal proceedings.
“We know that many large companies use settlement agreements
in this type of situation but we want to ensure that all employers
- large and small - can make use of them without incurring large
The Government wants to encourage greater use of settlement
agreements and make it easier and quicker for employers -
including SMEs - and employees to end the employment relationship
by mutual agreement in a way that protects workers rights but
helps businesses remain flexible.
The agreements are currently available for employers in some
circumstances. However, Government wants to encourage more
businesses to use them, including before they have reached the
stage of a formal dispute. By making settlement offers and
discussions inadmissible in unfair dismissal claims, businesses
can be more confident that they will not be used against them at a tribunal.
The offer could be in the form of a letter to the employee
and include detail on what kind of payment could be expected while
employees can still choose whether to accept the offer. Settlement
agreements should not replace proper performance management but
there are occasions when both parties recognise that it makes
sense to end the employment relationship. If an employee does not
accept then the employer will still need to follow a fair process
before finally deciding to dismiss the employee.
The new clauses will be tabled in the forthcoming Committee
stage. A consultation will be published in the summer on the
principles of guidance for using settlement agreements, including
draft letters and model templates for employers and employees to
use. We want to make it as easy as possible for small employers to
use fast settlement agreements without always having to resort to
Published on 23 May 2012, the Bill contains measures
improving the employment tribunal system, setting up the new
Competition and Markets Authority, enshrining the green purpose of
the UK Green Investment Bank, on directors’ pay and other measures
aimed at helping long term growth. The Bill continues its passage
Notes to editors: 1. The Enterprise and Regulatory Reform
Bill was published on 23 May 2012. The Bill can be found here http://services.parliament.uk/bills/#e.
2. The press notice at the time of publication can be found
3. As part of the Bill we are changing the name of
‘Compromise Agreements’ to ‘Settlement Agreements’ to help improve
understanding of their purpose. This is part of a broader package
to simplify and increase the use of such agreements to resolve
workplace disputes, particularly for small businesses, without the
need for an employment tribunal. We believe ‘settlement’ more
accurately describes an agreement that is about delivering a
satisfactory solution for both parties.
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