Cable proposes cap on unfair dismissal payouts

As part of his business-friendly drive, business secretary Vince Cable is to propose a cap on how much employees can expect to win for unfair dismissal.

by Michael Northcott
Last Updated: 19 Aug 2013

Saint Vince of Cable really is on a roll at the moment. First the red-tape bonfire, second that vague ‘business bank’ launch and now a cap on compensation for unfair dismissal at employment tribunals. The latest development will mean that compensation payouts may be limited to 12 months’ salary, and the introduction of settlement agreements where staff agree to leave with a payout but waive the right to go to a tribunal. Welcome limits on a system that has spiralled out of control. 

Well, the settlement that many employers up and down the land were (quietly) hoping for, was the ability to ‘fire at will’ – legislation that would make it easier and less legally risky to fire under-performing employees. But Vince has stopped short of shoe-horning this into the proposed legislation. The business secretary’s logic is solid: he said: ‘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.’ Makes sense, Vince.

Cable has long held the view (publicly at least) that ‘small companies want the confidence to hire, but we don’t want fear in the workforce.’ Many employers have felt in recent years that the balance is tipped in favour of an increasingly litigious workforce. Redressing the balance slightly will no doubt be a welcome move to cash-strapped SMEs that could really do without expensive legal bills to defend lawsuits.

But as Sarah Veale from the TUC told the BBC today, ‘the clue is in the term ‘unfair dismissal’. If people have been unfairly dismissed then this means the employer has done something wrong.’ Perhaps tweaking the legal position of the employer will not be as easy as Vince thinks. 

Nonetheless, compared to some of those other wheezes, this one is sensible and achievable. So let’s hope it actually happens, for once. 

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