Are Vince Cable’s proposals on employment law going to make it easier to dismiss staff?

Vince Cable announced last Friday that he is intending to begin a consultation process on three main issues to do with employment law which are employment tribunal fees, reducing the cap on unfair dismissal awards and looking at ways to encourage settlement agreements.

He has avoided looking at the thorny issue of “no fault” dismissals and this particular controversial reform has been shelved for now.

Unions have reacted angrily to the proposal to lower the cap on unfair dismissal awards from £72,000 to the national median average earnings of £25,882. Unions believe it will create more problems in the workplace, as employers would have less commercial risk if they acted unreasonably.

The planned reduction in the cap won’t make it easier to dismiss staff, as employers will still have to comply with employment law, but it will make it cheaper for them, with the consequence that it may encourage bad employers to take more risks when terminating an employee’s contract of employment.

The introduction of ways to encourage settlement agreements is not a radical reform in employment law and certainly is not a mandate for dismissing staff as settlements agreements are available now for both parties to consider before incurring the expense of an employment tribunal.

Settlement agreements are there primarily to help encourage a sensible resolution to employment disputes. Vince Cable’s proposals mean the introduction of standard template letters and standard settlement agreements to help reduce the cost of drafting compromise agreements, which cannot be a bad thing.

Hidden in amongst the two other proposals is the change in tribunal fees which Unions should be concerned about. It is being put forward that an unpaid wages claim will cost an employee £390, this is expected to affect lower paid employees the most, as they will likely be unable to afford to put in a claim.

Proposed changes in tribunal fees could mean that discrimination and unfair dismissal claims will cost £250 and a further hearing cost of £950. I don’t subscribe to the view that employers will not settle claims because they believe that employees won’t be able to afford to bring a claim because many employees have the benefit of legal expenses insurance and also have access to contingency fee agreements for employment disputes.

In summary the reforms are not a licence to dismiss staff but the proposed reforms appear to be more beneficial for the employer and the introduction of tribunal fees may help to stifle genuine employment claims for some lower paid workers.