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Business backs new cap on unfair dismissal


Business groups have welcomed a package of measures designed to reduce workplace disputes, including a proposed cap on unfair dismissal payments.


Publishing its response to the consultation ‘Ending the Employment Relationship’, the Government has confirmed that, subject to state approval, the maximum compensatory award for unfair dismissal will be restricted to one year’s salary.


However, there are no plans to change the overall limit of the cap, which currently stands at £72,300 and is due to rise to £72,400 in February.


According to the Department for Business Innovation & Skills, just one in 350 people who make a claim for unfair dismissal receive an award of more than their own salary, and the average award is less than £5,000.


The Government will also consult on proposals to reduce Transfer of Undertakings (Protection of Employment) or TUPE burdens on business, along with plans for a new ACAS Statutory Code for settlement agreements.


The proposals have been welcomed by business groups. Neil Carberry, CBI director of employment, said: ‘The current cap on unfair dismissal payouts is many times higher than the average sums awarded, giving workers unrealistic and inflated expectations of what a claim is worth.


‘It’s right that the new cap is linked more explicitly to an employee’s earnings. This will give businesses clarity about the potential costs and will scrap the perverse incentive for workers not to settle in the hope of getting a higher award.’


Meanwhile, Dr Adam Marshall, Director of Policy and External Affairs at the British Chambers of Commerce, commented: ‘As always, the devil is in the detail, but these proposed measures are fair and should reduce stress, uncertainty, and delay for both employee and employer.


‘The proposed cap will make employers more confident in recruiting and also in defending themselves, if accused of ending employment unfairly’.