Labour Research (November 2012)

Law Matters

Dismissal to be made easier

The coalition government has set out plans in a consultation document to make it easier, cheaper and faster for employers to dismiss workers and resolve tribunal claims.

The government intends that there will be a new statutory Code of Practice detailing how settlement agreements (the new term for compromise agreements) can be concluded.

The Code will require that the terms of the settlement offer be written out; that the reason for offering the settlement be made clear; and that the employee be given a reasonable period in which to respond. Although tribunals will be required to take into account the terms of the Code, offers of settlement will be inadmissible in legal proceedings.

In addition, the government plans to introduce some model documents — standard letters designed for use in making a settlement offer and a model settlement agreement. However, it won’t be compulsory to use these documents.

The government’s model settlement agreement requires employees to withdraw their tribunal claim before being paid the settlement figure; makes the employee rather than the employer liable for any tax that is due on the settlement payment; and requires the employee to keep the terms of the settlement confidential.

Finally, there is a proposal to cap compensation for unfair dismissal at a claimant’s annual salary, against the present maximum of £72,300.

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