The Operator: Hiring and Firing - are these red-tape measures enough to fuel growth?

3 July 2012

MICHELLE CHANCE AND AMY GRIFFITHS CONSIDER KEY DEVELOPMENTS IN EMPLOYMENT LAW AND COMMENT UPON THOSE ISSUES THAT WILL IMPACT ON YOUR DAY-TO-DAY BUSINESS.

The Government has made a big play of its ‘Red Tape Challenge’ and reform
of Employment Laws in particular as a way, so we are told, of encouraging
business growth led recruitment. To that end, a raft of changes were introduced on 6 April 2012 to improve the way employers can hire and fire and manage disputes. It remains to be seen if they will in fact have their desired effect, but certainly it makes sense for both managers and employees to be aware of the new provisions. 

Qualifying period for unfair dismissal increases from one to two years 
An employee who started their job on or after 6 April 2012 cannot now claim unfair dismissal until they have been employed for two years. There is always a danger that employees will try to bring higher value discrimination or whistleblowing claims instead, since there is no qualifying period for these. As well as being higher value with unlimited

compensation for actual losses going forward and a separate category of award for “injury to feelings” of up to £30,000, compared with the current statutory cap on unfair dismissal compensation of £72,300, these types of claims are generally regarded as the more “juicy” ones and inevitably attract more unwanted publicity for an employer. However, in theory, the change is designed to help employers retain greater flexibility and protection when dismissing employees. Employees recruited before 6 April 2012 still only need one year’s service to claim unfair dismissal so records should always
be kept of employees’ start dates to establish into which category they fall.

Employment Tribunal reforms 
Several changes have been introduced aimed at making the Employment Tribunal’s system for employee disputes more cost and time effective from a taxpayer perspective. From now on for example, if a tribunal determines that a party’s claim or defence has little reasonable prospect of success, it can order that party to pay a higher deposit of £1,000 and where a party has acted unreasonably or vexatiously, the tribunal has the power to make an order that that party pays the other side’s costs up to an increased value of £20,000. Tribunal fees (such as a fee to submit a claim) are also still under consultation. The idea behind these changes is to encourage both claimants and defendants to think more carefully about whether they need or want to go to court. Some say the higher costs are unlikely to prevent claims altogether but they may increase the prospect of negotiated settlements prior to a full-hearing.

Changes to statutory pay and tax limits
On 1 April 2012, the weekly rate of statutory maternity, paternity and adoption pay increased from £128.70 to £135.45. On 6 April 2012, the weekly rate of statutory sick pay increased from £81.60 to £85.85.

Also on 6 April 2012, the income tax personal allowance increased to £8,105
and the threshold at which employees pay the higher income tax rate of 40% reduced to £34,371.

This is likely to be seen as positive news to most, given the current economic climate.

Pensions
From October this year all employers will be required to enrol eligible employees into a qualifying workplace pension scheme, for example, an occupational pension scheme, a workplace personal pension scheme or the National Employment Savings Trust. The date on which an employer must begin autoenrolling its employees depends on the employer’s size. Large employers will become subject to the enrolment duties before small employers. The exact dates will depend on the number of workers in an employer’s PAYE scheme on 1 April 2012. Some say this is in fact an
additional red-tape burden for employers, rather than a tape-cutting measure. Employee communication will obviously be required around this change in the next few months.

Whilst these changes are mostly designed to benefit employers, efforts have been made to retain key protections for employees. It will be interesting to see if these measures alone help boost recruitment as we have been led to believe from politicians’ statements. The macroeconomic picture too must surely play a part. Whatever the ultimate outcome, HR departments now need to comply with the new landscape and ensure these changes are described in policy manuals and communicated to employees where necessary as soon as possible.

Michelle Chance & Amy Griffiths

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