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UK – New proposals to ease employment laws and drive labour flexibility

14 September 2012

Business Secretary Vince Cable today announced new steps to give firms more flexibility in managing their workforce and to reduce employment law red tape.

Today’s package comes in response to calls from business groups to simplify and speed up the process of ending the employment relationship when it breaks down, for the benefit of both employers and employees.

The government has given details on a number of topics, including the following:

  • its support for settlement agreements to help end employment relationships in a fair and consensual way
  • how it might reduce the cap on compensation for unfair dismissal claims
  • proposals to streamline employment tribunals by making it easier for judges to dismiss weak cases
  • responses to its call for evidence on the TUPE rules, when staff transfer to a new employer. Government has heard that businesses want this to be more efficient, and will consult on specific proposals before the end of the year, and
  • recommendations on how to improve guidance for small businesses on the Acas code of practice on discipline and grievance.

The UK has a lightly regulated and flexible labour market that the OECD considers to be amongst the best in the world, behind only the USA and Canada.

“We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights,” said Vince Cable.

“Our starting point is that Britain already has very flexible labour markets. That is why well over one million new private sector jobs have been created in the last two years, even when the economy has been flatlining.

“But we acknowledge that more can be done to help small companies by reducing the burden of employment tribunals, which we are reforming, and moving to less confrontational dispute resolutions through settlement agreements.”

The government is already delivering important reforms of employment law, including extending the period for eligibility for unfair dismissal from one to two years, encouraging more effective ways to resolve disputes and thereby reduce the number of employment tribunals, and removing the default retirement age.

Plans have been abandoned to introduce no-fault dismissals. But the CIPD has warned that alternatives “are not used in such a way as to undermine mutual trust and confidence in the workplace between employers and employees.”


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