Employers to be given greater powers to remove staff

14 June 2012

The Government has announced plans to introduce new legislation making it easier for firms to dismiss under-performing workers.

The new 'settlement agreements' would enable employers to fast-track staff out of the business by asking them to leave in return for an agreed pay off - a move the Government believes will benefit both employers and employees.

It is hoped the measure will minimise the number workplace disputes being taken to tribunals, which can often be an expensive and lengthy process.

Making the announcement at the second reading of the Enterprise and Regulatory Reform Bill, Business secretary Vince Cable said it would provide flexibility for employers and boost business confidence to take on new staff.

He said: "This Bill is an important part of this Government's plan for long-term growth: fostering enterprise, supporting business and creating jobs."

"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."

The agreements are already available for some employers in certain circumstances but the Government wants to encourage more businesses, including SMEs, to use them. Businesses that offer settlement agreements before a dispute arises will be legally protected against unfair dismissal cases which are taken to a tribunal.

Under the proposals, employees would receive a letter outlining what kind of payment would be expected. They would, however, still be able to reject a settlement agreement offer and take the case to a tribunal if they wish.

Business groups, including the manufacturers' association EEF, have welcomed the move saying it will bring more certainty to businesses.

The British Chambers of Commerce (BCC) director of policy Adam Marshall, said: "For businesses, reforms to employment law must deliver clarity, simplicity and lower costs. The proposal to beef up settlement agreements will offer many employers the certainty and security they crave. That is provided that any offer made to end a contractual relationship with an employee cannot be used against them in employment tribunal proceedings."