Government Announce Significant Cap on Unfair Dismissal Awards

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Manchester based employment solicitors, JMW, respond to Vince Cable's proposal for a major reduction in the level of unfair dismissal compensation awarded to employees if they are successful.

Business Secretary Vince Cable has announced a new Government proposal for a major reduction in the level of compensation awarded to employees if they are successful in bringing a claim for unfair dismissal.

The BBC reported new plans which aim to cut the limit on compensation payouts to a maximum of 12 months’ salary. (Full story here -

The Business Secretary also wishes to bring in settlement agreements, allowing staff to leave without being able to go to a tribunal and receive a payoff in return.

The proposed plans are the latest changes to the current employment law system, with previous changes made in April, which limited unfair dismissal claims to workers who had been in a job for two years, rather than one as before.

The proposals increased the qualifying period to two years for employees to be able to request a written statement of reasons of dismissal in an attempt to speed up the tribunal process and reduce the number of unfair dismissal claims by over 3,000 cases a year.

However the majority of members at the Institute of Directors believe the reform bill has in fact had the opposite effect intended by the Coalition, and fear it has instead decreased confidence between employees and employers rather than helping to grow the economy. Employees failing to meet the new criteria for unfair dismissal may instead attempt to bring their claims under discrimination law, which can often be more costly for employers to defend as there is no financial limit.

JMW, a leading law firm based in Manchester, believes Government plans to reduce unfair dismissal protection has not only severely curtailed fundamental protection for employees, but has also failed to save businesses a projected £6 million – a figure calculated by the Department for Business, Innovation and Skills.

Speaking on behalf of JMW, Carl Moran, Partner in the Employment Law department, responded to the figures from the IoD poll stating, “The significant number of IoD members who strongly believe the latest employment law reform bill will fail to stimulate growth and create more favourable conditions for business illustrates the obvious miscalculation by the government of the potential effects of these changes.

“If any employee has been unfairly dismissed, then their employer has done something wrong and it’s appropriate that a tribunal should decide the compensation the employee deserves. However the latest proposal to cap unfair dismissal compensation could cost businesses more as employees may seek to try and raise a claim of discrimination for which the compensation level is uncapped.”

JMW’s employment law solicitors specialise in supporting employees who are seeking help and advice regarding unfair dismissal. For more information, call 0845 872 6666 or visit

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