Government plans to cap unfair dismissal compensation will not make it easier to fire employees. It’ll just make it cheaper
Two years into the coalition, the attack on employment rights is gathering pace.
The government have already made it more difficult to claim unfair dismissal: an employee now needs two years’ service instead of one before they can bring a claim. This was no great surprise – it was two years from 1980 to 1999, when Labour reduced it to one year.
Then they considered doing away with unfair dismissal claims altogether and replacing them with “no fault dismissal” ie fixed compensation for dismissal, at a much lower level than present, without any need to establish unfairness. This was suggested in a report by the venture capitalist and Wonga investor Adrian Beecroft who happens to have given over half a million pounds to the Conservatives in the last five years.
Now they tell us they will not bring in “no fault dismissal”, but they still propose to slash the amount of compensation payable for unfair dismissal. The latest proposal was announced last week and in true “hang ‘em first and try ‘em after” style, the government now purports to consult on this idea even though it is already set out in a government bill which has already passed nearly all of its stages in the House of Commons.
For full details of that proposal, see the piece I wrote back in May but to summarise, the proposal is to reduce the maximum compensatory award from £72,300 (at present) down to median pay (£26,000) or one year’s pay, whichever is lower. (The bill gives the power to enact a multiple of 1, 2 or 3 times median pay, but it is pretty clear this government would go for the lowest).
So the cap on compensation would be slashed by two thirds, more for low earners, because half of all workers earn less than £26,000. For someone who earns only £15,000, the cap would be £15,000.
It is true that the median award is less than £5,000, and only a small number of awards are affected by the present cap. But still it is grossly unfair for those who are. I had a client who had worked for his employer for 38 years. He was entirely blameless in his dismissal. The tribunal ordered reinstatement and the employer refused to comply. He had found other work but due to pension loss his net loss was assessed at £121,000. His award was capped at £53,500 (the limit then in force). I cannot see why his employers should not have been made to compensate him properly. It was open to them to reinstate him and then his losses would have been tiny in comparison. They chose not to. If the cap goes down to £26,000 we can expect to see a lot more cases like that. It’s a licence to treat people badly and still pay less.
But equally unjust is the other change being introduced: from next year, anyone who wants to bring any claim in the employment tribunal will have to pay a fee to issue the claim and a further fee to proceed to a hearing. For bigger claims such as unfair dismissal or discrimination the total fees will be £1,200. There can be no doubt the aim is to deter claims, and the fees will undoubtedly present an insurmountable hurdle for many claimants.
None of this will make it easier to fire employees (and supposedly therefore to hire them, as claimed); it will just make it cheaper. But that’s what the Conservative Party’s backers want. And it seems the Liberal Democrats are happy to go along with it.
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