In May 2010, the government agreed to review employment law as part of the coalition agreement.

In April 2011, it launched the Red Tape Challenge to reduce the regulatory burden on businesses, which has included exploring and identifying ways in which employment laws could be amended to make it easier for companies to recruit and manage employees.

The following changes take effect from 29 July 2013 in a bid to encourage employers to create new jobs and recruit and to boost the economy.

Introduction of fees for employment tribunal claims

Prior to the changes, someone wishing to bring an employment tribunal claim against their employer or former employer did not have to pay a fee. From 29 July, a fee will be payable and the level of this will depend on the type of claim.

  • Those relating to issues including refusal to allow time off and unlawful deduction from wages will be categorised as Type A claims.
  • Claims relating to issues including dismissal and discrimination claims will form Type B claims.

A fee of £160 is payable to issue a Type A claim and the fee rises to £250 for Type B claims. If the matter progresses to a hearing, a further fee of £230 must be paid for Type A claims and £950 for Type B claims.  If a claim consists of both Type A and Type B complaints, the higher fee will apply.

The employment tribunal judge will have the discretion to make an order that the unsuccessful party pays the fees incurred by the successful party.

The aim of the fees is to transfer some of the annual £74.4 million cost of running the employment tribunal system from taxpayers those people who use the system.

Compensation limits

Prior to the reforms, the maximum compensatory award in an unfair dismissal was £74,200.  From 29 July, the cap will be the lower of £74,200 or 52 times the former employee’s week’s pay. A week’s pay, in accordance with the Employment Rights Act 1996, is calculated as

  • remuneration payable under the individual’s employment contract for working for one week, in accordance with the terms of their contract
  • or, where remuneration depends on the amount of work carried out, the average remuneration payable under the contract over the 12 weeks before the dismissal.

The likely effect of this change is that the overall level of unfair dismissal awards will decrease because employees cannot receive more than 12 months’ pay in compensation.

Revised employment tribunal rules

To simplify the process for administering employment tribunal claims, the procedure rules have been changed.

For example, once the response to the claim has been received, a judge will consider all the documents and decide whether the claim, response or any part of it should be dismissed because of either an absence of an arguable complaint or a lack of jurisdiction.

Pre-hearing reviews and case management discussions will also be combined and referred to as preliminary hearings.

Compromise agreements to be renamed settlement agreements

This compulsory name change has been introduced under the Enterprise and Regulatory Reform Act 2013.  The government have decided that settlement agreement more accurately reflects the situation someone faces when signing such agreement as employees, or former employees, do not wish to appear to be compromising.

Pre-termination negotiations

Prior to 29 July, discussions conducted on a without prejudice basis could not be disclosed in any subsequent legal proceedings unless there has been what is known as “unambiguous impropriety”.  This protection only applied where the parties were involved in a legal dispute.

From 29 July, conversations between an employer and employee before the termination of employment, with a view to terminating employment on agreed terms, may not be considered by a judge if a claim for unfair dismissal is subsequently issued.


The reforms have attracted a significant amount of media coverage but their true impact remains to be seen.

We will keep you updated on the actual effect of the changes over the coming months but if you would like more information on any of these issues, please contact Donna Martin.