Category Archives: Enterprise and Regulatory Reform bill

Voluntary Settlement Agreements & Protected Conversations

It seems that the “fire at will” dismissals proposal put forward by the government earlier this year following Adrian Beecroft’s report has met its demise.  From early analysis of the consultation exercise it seems that there was a lack of enthusiasm from small businesses to implement the no fault dismissal procedure with only 4 in 10 businesses being in favour.

This radical proposal was suggested as way to increase recruitment in the UK but it seems that firms are not convinced.

Instead the government are proposing voluntary settlement agreements (re-branded compromise agreements) following a protected conversation.  This would allow companies to force underperforming staff to leave with a pay off in return for not bringing an employment tribunal claim.  This would be mutually agreed between employer and employee.  The government is currently consulting on whether to set pay off levels; a pay off could be capped at a year’s salary making a termination payment quite attractive.  They are also consulting on model paperwork to support the new proposed settlement agreement.

Employees can decline to accept and then an employer should follow a fair dismissal procedure.  An employee would have to weigh up whether they would be better off taking a case to an employment tribunal whilst declining an offer.  Successful unfair dismissal claims could currently each £72,300.  However, it is rarely the case that the maximum pay out is reached, with the average being only just over £9,500.

Whilst many business leaders are in favour of this change to the original proposal as it allows businesses to have more flexibility, others consider that this is undermining employment rights by allowing an employer to get rid of staff whose face does not fit.

Nevertheless the proposal was put forward as part of the Enterprise and Regulatory Reform Bill.