New law makes it easier to sack people... or does it?

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Vince Cabletefan Rousseau/PA Wire/Press Association Images

New proposals for overhauling employment law include a new twist - which would allow employers to offer sacked staff a sum of cash in order to encourage them to go quietly - without incriminating themselves if the case ends up at tribunal.

So how would it work, and why aren't the experts getting more excited about it?

Settlements

The proposal is to allow 'settlement agreements'. These would provide an alternative to the long draw-out dismissal process that businesses currently have to go through if a member of staff isn't working out and they want to persuade them to leave.

Instead of endless warnings and disciplinary processes and appeals, they could simply offer them a cash payment and ask them to go away. The employee is not bound to accept the cash, but cannot bring it up if a case ends up at tribunal.


No-fault alternative

This is a big departure from early suggestions of a 'no-fault' dismissal process - because employees would have the right to refuse the money and refuse to take the quick approach to dismissal.

Business Secretary Vince Cable (pictured) said: "Settlement agreements are smart, fair and pro-business reforms which deliver results for employees and employers. It empowers employers by enabling them to keep their workforce flexible and encouraging alternative ways of solving workplace problems rather than resorting to a tribunal. But crucially it does so in a way that keeps the necessary protections for employees in place."

Employment Relations Minister Norman Lamb added: "There are inevitably occasions when the employment relationship doesn't work out. Employers have to feel confident in dealing with situations such as where an employee isn't pulling their weight or where someone is unreliable or even guilty of misconduct.

"In these instances it is sometimes in the best interests of both employee and employer to end the relationship speedily by reaching a settlement. An employee leaving by agreement can do so with their dignity intact. The employer secures peace of mind knowing that they will not face expensive tribunal proceedings. We know that many large companies use settlement agreements in this type of situation but we want to ensure that all employers – large and small – can make use of them without incurring large legal fees."

Not excited

It's this final point that lies at the heart of why the experts aren't getting particularly excited about the announcement. At the moment this sort of agreement is relatively regularly used already.

Catherine Wilson, Employment Partner at law firm Thomas Eggar, says: "We already have all of this in compromise agreements and conciliated settlements. Compromise agreements were introduced in 1993 and mean if an employer brings in an independent lawyer to advise the employee, as to what they are compromising on, they are legally binding." She says these have been around for a long time now and are "very successful."

The reference to legal fees doesn't convince Wilson, who says the whole process doesn't have to cost a business more than £250. She says: "The government is under a lot of pressure to deregulate and to be seen to be doing something, but this particular step doesn't achieve very much."