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Government to cut limit on unfair dismissal payouts

BY Gerry O'Hare
Employment Law & HR
BG Purple

Vince Cable has today announced plans to cut the compensation limit for unfair dismissal which currently sits at £72,300.  Mr Cable will consult on plans to cut the limit on compensation payouts to a maximum of 12 months' salary.  He has also announced his support for settlement agreements whereby staff agree to leave without being able to go to tribunal in return for a financial sum. Acas, the conciliation service, has agreed to provide a new code of practice for settlement agreements. 

While many small businesses may rejoice at the proposals, the announcement has, as was expected, angered many trade unions. 

Interestingly, the proposals in relation to limiting the compensation limit may affect high earning individuals who have been unfairly dismissed the hardest.  Their compensation awards may fall far short of their actual financial loss leaving unfairly dismissed employees out of pocket.  In addition, once you combine the stress and time involved in proceeding to Tribunal (and the costs) these proposals may deter those who have genuine grounds for a claim. 

More information on Mr Cable's announcement can be found here:


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