By Daniel Hunter

New steps to give firms more flexibility and confidence in managing their workforce and to reduce employment law red tape, have been announced by Business Secretary Vince Cable. They are most likely to benefit small businesses.

The package comes in response to calls from business to simplify and speed up the process of ending the employment relationship when it breaks down, for the benefit of both employers and employees.

The Government has given details of:

- its support for settlement agreements to help end employment relationships in a fair and consensual way. A consultation on how best to make this work in practice starts today and Acas has agreed to provide a new code of practice

- how it might reduce the cap on compensation for unfair dismissal claims

- proposals to streamline employment tribunals by making it easier for judges to dismiss weak cases

- responses to its call for evidence on the TUPE rules, when staff transfer to a new employer. Government has heard that businesses want this to be more efficient, and will consult on specific proposals before the end of the year, and

- recommendations on how to improve guidance for small businesses on the Acas code of practice on discipline and grievance.

The Government also responded formally to the call for evidence on proposals for compensated no fault dismissal for micro-firms. Based on the evidence presented by business the Government will not be taking forward the proposal.

The UK has a lightly regulated, flexible labour market that the OECD considers to be amongst the best in the world, behind only USA and Canada. The recent World Economic Forum Global Competitiveness Report cited the flexibility of the UK’s labour market as one of the main reasons for its improvement in the global rankings to 8th from 10th.

But the Government has committed to look at ways to make it more responsive to businesses through a parliament long review of employment law, in conjunction with the Red Tape Challenge on employment law, with the aim of clearing away unnecessary and complex regulation that has damaged flexibility, created perverse incentives, increased business risk and unnecessary administration.

"We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights," Business Secretary Vince Cable said.

“Our starting point is that Britain already has very flexible labour markets. That is why well over one million new private sector jobs have been created in the last two years, even when the economy has been flatlining.

“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."

The Government is already delivering significant reforms of employment law, including extending the period for eligibility for unfair dismissal from one to two years, encouraging more effective ways to resolve disputes and thereby reduce the number of employment tribunals, creating a universally portable Criminal Records Bureau (CRB) check and removing the default retirement age. The Government has considered, or is already taking forward, 80 per cent of proposals from Adrian Beecroft’s report on employment law, published earlier this year.

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