With changes to employment law - including a new maximum compensatory award for unfair dismissal - scheduled to come into force this summer, lawyers Christopher Fisher and Katherine Fox look at the likely implications for UK employers.
In January, the Government issued its response to the recent consultation "Ending the employment relationship".
It covers a number of proposals, but two are worth highlighting in particular: the first and, arguably, most significant is the new cap on unfair dismissal compensation; and the second involved new rules for any pre-termination settlement offers.
The current maximum compensatory award for unfair dismissal is £74,200. The new cap will be a maximum of one year's pay or £74,200, whichever is lower. Given that the average annual wage in the UK last year was in the region of £26,500, the new cap will be relevant for many employees.
It is also worth noting that, seemingly, a year's "pay" for the purposes of the new cap will be calculated by reference to the current statutory definition of a week's pay. As such, it will not include pension, benefits, expenses or discretionary bonuses.
Managing award expectations
But is this really going to affect the amounts awarded by employment tribunals? In most unfair dismissal cases, a year's pay would be at the top end of what a successful employee would be likely to achieve at tribunal and the statistics for the year ending March 2012 show an average compensatory award of just over £9,000.
The greater practical impact of the new cap will be to manage employees' expectations as to the value of their claim."
So perhaps the greater practical impact of the new cap will be to manage employees' expectations as to the value of their claim, and as a result we may see a greater willingness for early settlement discussions.
There is, however, the risk that the new limitation could encourage employees to look to combine their unfair dismissal claim with an uncapped claim, such as in the case of whistleblowing or discrimination, in an attempt to