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Compensation for unfair dismissal to be capped

New measures have been announced to reduce employment law red tape, by simplifying and speeding up the process of ending an employment relationship.

Business Secretary Vince Cable announced that the Government is supporting settlement agreements, which would allow an employee to agree to leave work without a tribunal in return for a pay-off.

A consultation on how to best make this work in practice has now started and Acas has been commissioned to provide a new code of practice for employers.

A cut on compensation for unfair dismissal claims has also been proposed, to streamline employment tribunals. Compensations payouts could be limited to a maximum of 12 months salary.

Cable said: “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.

“Our starting point is that Britain already has very flexible labour markets. 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.”

Acas chair, Ed Sweeney, said: “By referring to a clear and straightforward Code, employers and employees can be confident that they will know how to handle the termination of an employment relationship fairly.”

Mike Emmott, employee relations adviser at CIPD, said: “The idea that businesses should be able to manage the performance of their employees effectively, without fearing extortionate costs and a time consuming process, is a good one.

“However, the proposed reforms must not undermine the principle of mutual trust and confidence that lies at the heart of positive and productive employment relations.”

And Sarah Veale from the TUC told the BBC: “The clue is in the term ‘unfair dismissal’. If people have been unfairly dismissed, this means the employer has done something wrong and it’s right that the tribunal should then decide what sort of compensation the person deserves.”

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