What the new employment changes mean to business

1st February 2012

As we enter a new year employers are being reminded to prepare themselves for changes set for introduction over the coming 12 months.

The Government is to put forward a raft of measures aimed at reforming employment law and whilst we wait to hear the detail, one change that is known for certain is the change in pension age.

The Pension Act received the Royal Assent and became law last year. It means that the pension age for women will rise to 65 in 2018; the age for both men and women will rise to 66 by October 2020 and to 67 at some time between 2026 and 2028. This follows on from the abolition of the default retirement age (DRA) in October and will mean that workers can choose to carry on working after the state pension age and choose when to start taking their state pension.

The scrapping of the retirement age has come at the same time as figures show a huge 32% increase in the number of age discrimination claims* and for employers, the change means ensuring there are age-friendly attitudes and processes in place.

The Government has also announced some of the other measures that will be coming up for legislation in the near future, to include changes to unfair dismissal and consultation procedures.

The proposal to increase the qualifying period for bringing an unfair dismissal claim to two years has been widely reported. The effect will be that an employee who is dismissed within two years of starting work will not be allowed to bring an unfair dismissal claim, a doubling of the current qualifying period of one year.

However, the Government may be set for a difficult ride on this one, as there have been previous attempts to have a longer qualifying period. It was originally set at two years, but was challenged as being discriminatory, by placing certain groups at greater risk, and as a result was reduced to its current one-year level.

The Government has presented this as a route to boost employment, hoping that small to medium sized businesses will be encouraged to take on employees, particularly younger workers, given more flexibility on staffing decisions over the extended two year period. Critics have said that young people would be hardest hit by the relaxed dismissal process, being most likely to be last in and first out, whilst more experienced workers are likely to be retained.

Also set for change are "compromise agreements". When an employee is dismissed the employer and employee often enter into such an agreement, under which the employee receives some compensation and agrees not to make a claim for unfair dismissal. These are to be replaced by "settlement agreements" which will be simpler and will have standard wording.

The Government also plans to introduce "protected conversations" in which employer and employee will be able to discuss issues without fear of subsequent retribution or accusations. It is hoped that this will open discussion about performance, retirement plans and so forth. However, the employer will not be protected against claims of discrimination or harassment arising out of a protected conversation and so, in practice, their use may be limited.

A fundamental review of the procedural rules of industrial tribunals will be held, and the procedures for bringing a claim for unfair dismissal will be reviewed. This includes, for example, plans for a one month conciliation period. The effectiveness of the TUPE regulations - Transfer of Undertakings (Protection of Employment) Regulations - that protect employees rights and conditions when a business is sold or transferred, will be reviewed.

Finally, the Government plans to introduce a drastically simplified dismissal procedure for micro employers with less than ten employees, with no-fault compensated dismissal being the norm.

Our Employment Expert, Sarah Carter, has advised:- "The Government hopes that these reforms will bring down unemployment and stimulate investment and expansion, by cutting red tape and the risks involved in taking on new staff. But the devil is in the detail - We will have to wait and see what that holds and no one should change policies until we know the full picture. In the meantime, the beginning of the year is a good time to review current practice. Employers need to make sure they have robust processes in place, particularly looking at how they are treating older workers. If we do see the promised increase in the unfair dismissal qualifying period, it's quite likely that other claims will increase, such as age discrimination.”

Businesses should also be checking to see they've covered all bases with the raft of legislation and the outcome of significant cases we've seen in the past year - the Bribery Act, the changes around agency workers, and how to manage social media use by staff.


* Official figures for cases submitted to employment tribunals in the year to March 2011

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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