Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013

Baroness Donaghy Excerpts

Monday 15th July 2013 Grand Committee

[Lord Monks]

The Minister will be grateful that I do not propose to go through my opening remarks again. I am sure that he has got that particular point. The Division neatly ended a paragraph of thoughts and so I will move on to another: the purpose of the change.

We are being asked to believe that because people can see a crock of gold in this compensatory award at present, the cap has become an expectation which encourages claims and then deters employers from undertaking recruitment because they are afraid that this gathering mass of people will all think that they are going to get their name up in lights with the top award. It seems far-fetched in the extreme to say that the picture being presented is a real one. I instead come to the conclusion, which I would test on the Minister, that this is simply about reducing the amount of money that some employers have to pay to some employees. It is a step at the expense of the employee in favour of the employer.

This is one of many steps that have been taken in this area in recent times, particularly with the raising of the qualifying period for unfair dismissal from one year to two, which took 3 million workers out of the scope of unfair dismissal legislation. That was perhaps the biggest but there have been a number of other changes. I suggest that this is another salami cut into employment rights at work. It is not the biggest—I do not want to exaggerate my case—but it is one under which some employees will lose, while some employers are going to gain from it. I hope that the Minister will acknowledge that that is really what it is about rather than this romantic story that the Government seem to be advancing: that all this reduced compensation will mean fewer claims, which means more employment, to put it in the reverse way from how I put it before. Is this not simply about reducing the amount that employers have to pay to workers who they have unfairly dismissed? Those workers have been not just dismissed but unfairly dismissed.

[Baroness Donaghy]

My Lords, I shall make a couple of points. My noble friend Lord Monks has already referred to the Secondary Legislation Scrutiny Committee’s report. I understand that in the absence of clear consensus on views, sometimes the Government have to take a leadership position, which this Government have done. Unfortunately, it is not a consistent position. I question why the Government have decided not to take action on the basis of no consensus on one issue and to take action on the basis of no consensus on the second issue.

--- Later in debate ---

[Lord Popat]

My Lords, as I said earlier, 0.25% of cases at the tribunal for unfair dismissal have resulted in compensation of £74,200, but 90% of the cases that have gone to the tribunal have resulted in compensation of just under £5,000. Therefore, even somebody on the minimum wage will probably be able to get the right level of compensation. All parties recognise the need for a cap. As I said earlier, the median award is £4,560, which is below the median salary. Therefore, for 99.75% it is quite reasonable for low-paid people to have this cap or the maximum of £74,200.

[Baroness Donaghy]

I was making a general point about the Government allowing, if you like, propaganda about excessive amounts of money to simmer around in the pot, whereas we all know that the reality is that the award figure is very low. I should have mentioned earlier that, even when the minority of the minority of the minority are awarded compensation, 40% of them do not receive it. They have to either accept nothing or go through the civil courts to chase the employer for the award. Therefore, the talk about caps and limits and about putting employers off employing people goes along with the propaganda about large amounts of money, when the reality is that those amounts are small and 40% of them do not get paid. Does the Minister not feel that he could at least put forward a consistent point of view about this and not put a cap on the pay-based awards?

[Lord Popat]

The noble Baroness raises a very important issue. This large amount of £74,200 has been in place for some time. We are trying to clarify matters, and the most reasonable or most equitable way of doing this and of speeding up the tribunal process or the agreement between employers and employees is to bring in a cap of either 12 months’ salary—which is quite reasonable because it gives the employee 12 months to find an alternative job—or £74,200. As I mentioned earlier, 95% of the awards given in the past have been settled for less than the median of £4,560. We have put information on median awards on ET1 claim forms to help to address issues of perception. We are also improving the guidance to help employers and employees to have better information.

The Government have given due regard to the comments of the Secondary Legislation Scrutiny Committee and have concluded that the order meets the requirements of the Act. I commend it to the Committee.