News and Events

Employment Reforms For The Future... Good Or Bad News For Employers?

In an attempt to lessen pressure on businesses and the Employment Tribunal system, and boost recruitment in the current economy, the government confirms an increase in the qualifying period for unfair dismissal and plans to introduce Tribunal fees for submitting claims.

At present, employees have to be employed for 12 months (the "qualifying period") in order to have protection from unfair dismissal. From 6 April 2012, this will increase to 2 years - allowing employers to terminate employment before that time without liability.

The qualifying period has changed back and forth over the years, being reduced back to 1 year in 1999. According to some experts, there was no evidence that a reduction in the period had any detrimental effect on the economy or that an increase in 1985 provided any benefit. In fact, the increase lead to a decision that a two year period amount to indirect discrimination against women.

It is important to remember that the change will not affect claims in respect of discrimination or whistle blowing as employees have protection against these claims from day one. The change in 2012 is likely to lead to increased attempts to link dismissal with discrimination in order to be able to pursue a claim. In turn, this will lead to longer, more expensive claims due to the more complex nature of the law in these areas.

There are concerns that the change will cause a "hire and fire culture", giving employees less job security, less enthusiasm for their role and towards their employer and will be damaging to employee relations. In addition, the number of claims the change will exclude are likely to be a small percentage of those heard at the Tribunal every year.

Employers should have procedures in place to deal with poor performance etc well before the current 1 year threshold. This will be of more benefit to business than retaining an unproductive or weak employee.

Introduction of Tribunal fees.
Currently, there are no fees payable to submit a claim to the Employment Tribunal. As a result, we have seen a rise in weak or misconceived claims and unreasonable litigants with unrealistic expectations. These lead to significant costs for businesses to defend such claims, even if they are struck out or withdrawn at the preliminary stages - costs a lot of businesses can ill afford.

It is proposed fees will be introduced in 2013 with rumour suggesting these will be £250 to submit a claim and £1,000 if the claim is listed for hearing. For claims valued at £30,000 or more, fees will be greater. These will be returned if the Claimant wins.

So, will these costs help?
The introduction of fees may well discourage some weak claims from being submitted and is an approach likely to be welcomed by most businesses. However, those more unreasonable employees who are adamant (mistakenly) as to both the strengths and value of their claims are unlikely to be deterred by the introduction of fees. They will continue in their misguided belief that they have the right to claim compensation and will be rich at the end of the process. It is more likely to discourage true claims with employees unable to afford any additional costs without a job in a recession.

Fees may also reduce the likelihood of an early settlement. If they are to be paid back to a claimant if successful, they will want to include these in any settlement figure, thus potentially increasing the liability of employers. For small claims such us holiday pay, for example, the fees may be greater than the actual value of the claim. It remains to be seen whether they will be reduced for such claims. In addition, as a further payment of £1000 is proposed to list a claim for hearing, tactically, employers may wait to see if the claimant pays this and continues with the claim before considering settlement.

Whilst, in theory, applying costs to the Employment Tribunal process makes sense, the reality may actually be more costly for employers.

Battens Employment Team can advise on all Employment and HR Matters. For more information or a chat in confidence, please contact Dawn Gallie, Head of Employment, on 01935 846233.

Created: 14 October 2011