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Employment and safety laws to be relaxed

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14th Sep 2012
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Workers will face a cut in how much they can claim for unfair dismissal at employment tribunals under a series of proposals announced by business secretary Vince Cable.

The Department of Business Innovation and Skills spent most of last week rolling out proposals to cut back on red tape which took in employment law reforms and looser health & safety regulations

As well as consulting on proposed changes to employment law, the BIS is also seeking responses on plans to reduce the limit on unfair dismissal payouts.

The recommendations were made in a report to Prime Minister David Cameron by venture capitalist Adrian Beecroft. While the principle behind the report was to make it easier and cheaper for companies to dismiss staff, proposals that would allow companies to fire under-performing staff through “no fault” dismissals have been dropped.

As reported in HRZone.co.uk the tribunal system “shake up” has sparked a lively debate among lawyers as to how significant the impact on employers is likely to be.

According to Kate Hodgkiss, employment partner at DLA Piper, only 53 of the 163 businesses who responded to a consultation on the matter were in favour, with the majority believing that the proposals would act as a disincentive to hiring, create a two-tier workforce and make micro-businesses uncompetitive.

One of Cable’s most significant proposals suggested cutting the maximum compensation that could be awarded to employees for being unfairly dismissed. The current ceiling is £72,300, but the government is seeking views on whether to cap awards at 12 month’s pay or reduce them to under £26,000.

Hodgkiss said this would simply result in unfair dismissal accusations being swapped with potential discrimination claims: “This is likely to have a very significant impact, with employees becoming more likely to bring complex and expensive discrimination claims as a result – a potential nightmare for companies keen to manage their reputations.”

Hodgkiss added that such change would also see senior executives becoming keener to negotiate “far more generous contractual packages” in order to ensure that they received adequate compensation if their contracts were terminated.

However Jim Lister, head of employment at law firm Pannone disagreed, arguing that because the number of tribunal claims that resulted in compensation of more than 12 month’s salary were currently insignificant, the proposed cap would “make virtually no difference”.

The proposals by the Department for Business, Innovation and Skills continue the Red Tape Challenge it started last year and include:

  • Support for “settlement agreements” to help end employment relationships in a fair and consensual way, with Acas working on a new code of practice
  • 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 Transfer of Undertakings (Protection of Employment) Regulations (TUPE) rules protecting employment rights when staff transfer to a new employer. The government has heard that businesses want this to be more efficient, and will consult on specific proposals before the end of the year
  • Recommendations on how to improve guidance for small businesses on the Acas code of practice on discipline and grievance

While these employment law reforms are being examined, BIS also announced plans to exempt hundreds of thousands of businesses from health and safety inspections.

The Federation of Small Businesses (FSB) welcomed the health & safety proposals, commenting: “We all know that poorly framed regulation costs in time and money.”

But the Trades Union Congress (TUC) said the attempt to protect businesses from a “compensation culture” would put the health of millions of workers at risk.

“Contrary to myths peddled by ministers, the UK is facing an occupational health epidemic,” said TUC general secretary Brendan Barber. “Over 20,000 people die every year as a result of a disease they got through their work and a further 1.9m people are living with an illness caused by their work.”

Some of the low risk workplaces identified by the government, such as shops, actually experience high levels of workplace injuries, Barber said. “This will only get worse if employers find it easier to ignore safety risks.”

Alex Botha, chief executive of the British Safety Council, said it is a “myth” that there is an army of health and safety inspectors disrupting and stifling UK business day in, day out.

It is estimated that every workplace in Great Britain can, presently, expect a visit from an inspector on average once every 38 years, he said.

Recent figures from the Health and Safety Executive showed that there were 173 workplace deaths over the past year in the UK, compared to 175 in 2010/11 but up from 147 in 2009/10.

Baker Tilly, ever-vigilant for a tax angle on a business story, asked its clients what tax red tape if wanted the Treasury to cut.

Their requests included:

  • Reduce the number of tax rate bands. There is widespread confusion about the difference between the bands - 10%, 20%, 40%, 50%, 32.5%, 42.5% - especially when dividend or savings income is involved
  • Simplify the taxation of non-doms. There are many complications in the remittance basis for non-doms including having to segregate overseas capital / income/ capital gains, having to think who is a “relevant person”, and the administration of it all
  • Corporate clients were already bogged down with the onerous compliance regime surrounding PAYE/P11D. To this has been added Real Time Information and Auto-enrolment. The additional costs, both time and money, to have accounts transferred into iXBRL format are also onerous

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