UK: Employment Law For 2012 – Major Forthcoming Changes

Last Updated: 31 January 2012
Article by Adam Grant

2012 promises significant changes for employers and employees alike.  In Autumn 2011, the Government proposed two major changes to employment law. An increase in the qualifying period for unfair dismissal claims and a wholesale change to Employment Tribunal practices. The aim of the changes is to encourage employee recruitment and to cut red tape for businesses. We set out below some key matters of which you should be aware.

Compensation limits (1 February 2012)

As from 1 February 2012, a statutory week's pay, which is most commonly used to calculate statutory redundancy pay and an unfair dismissal basic award, will increase from £400 to £430. The maximum compensatory award for unfair dismissal claims will also increase from £68,400 to £72,300.

Statutory rates of pay (April 2012)

From April 2012, statutory sick pay will increase from £81.60 to £85.85 per week. Statutory maternity, paternity and adoption pay will increase from £128.73 to £135.45 per week.

Unfair dismissal qualifying period (6 April 2012)

It is expected that as from 6 April 2012, the qualifying period for unfair dismissal claims will increase from one to two years. There is confusion as to whether the increased qualifying period will apply to existing employees, i.e., those with less than two year's service at 6 April 2012. However, the last time that the qualifying period changed it applied only to those employees engaged on or after the date that the change came into force. The commentary suggests that the same approach will be taken in this instance. Therefore, if employers are contemplating recruitment drives they may wish to hold off until April to take advantage of the change.

From a practical perspective, the change may pose problems for employers. Firstly, it may prove harder to recruit since many employees, particularly in the current economic climate, will not be prepared to risk a two year period with no unfair dismissal rights. Secondly, disgruntled employees who do not have two years' service may try to bring other claims - citing discrimination, whistle-blowing, or trade-union reasons, for their dismissal - in order to avoid the service requirement. This already happens when employees have less than a year's service. These claims, while they may be unsuccessful, will be more complex and consequently more expensive to defend.

Finally, there is a possibility, as happened in 1992, that the two-year rule could be challenged on the basis that it is indirectly age and/or sex discriminatory. It has already been established that more women than men have less than two years' continuous service; the same is true of younger workers. If a similar challenge is brought, employers may face years of uncertainty before the courts decide whether this indirect discrimination can be justified.

Key Employment Tribunal Changes (starting from April 2012)

Deposit Orders

Although a seldom used power, if a Tribunal believes that a claim has little prospects of success they can order the individual to make a payment into court of up to £500 which may be forfeited if the case is lost. It has been suggested that this figure will increase to £1,000 in April 2012 in order to deter vexatious litigants.

Costs awards

Another change expected in April 2012 is that the maximum amount of legal costs a Tribunal can award to the successful party will increase from £10,000 to £20,000. Again, this is to discourage parties from bringing misconceived proceedings. However, this will still require a change in the Tribunal's approach as they are often reluctant to award costs.

Tribunal fees

It is proposed that from 2013/2014 employees will have to pay to bring a claim. The government has proposed two different fee charging structures which are currently being consulted upon:

  1. An issue fee and a hearing fee, the amount of which would depend on the nature of the claim. For example, in an individual unfair dismissal claim, the claimant would have to pay an issue fee of £200 and a hearing fee of £1,000.
  2. An issue fee only, the amount of which will depend on what the claimant states their claim to be worth. For example an individual unfair dismissal claim worth less than £30,000 would cost £500 to issue and one worth more would cost £1,750.

The hope is that individuals will think carefully before embarking on litigation. The downside is that if the individuals do decide to issue a claim, it may be harder to persuade them to withdraw with no payment as they will not wish to be left out of pocket by having to cover any Tribunal fees themselves.

Pension auto-enrolment (October 2012)

New laws coming into effect in October 2012 will require UK employers to automatically enrol eligible jobholders into a pension scheme and pay mandatory minimum contributions. The government is staging implementation over four years from 1 October 2012, with employers separated into bands according to their payroll size. Larger employers will be starting first and the initial wave of employers will be able to voluntarily start auto-enrolment as early as July 2012.

National Minimum Wage (October 2012)

Limits will be reviewed and potentially increased.

Other possible key changes

TUPE 2006

The BIS is currently seeking views on the effectiveness of TUPE 2006 given concerns that the regulations are overly bureaucratic. Particular focus will be on service provision changes, insolvency proceedings and collective redundancy consultation. The call for evidence will close on 31 January 2012 and the evidence will be used to formulate policy proposals that will be put forward for formal public consultation.


An amendment may shortly be made to the Working Time Regulations 1998 to clarify when leave which cannot be taken due to absence on maternity, adoption, parental and/or paternity leave can be carried over to the next leave year. 

Disputes and Litigation

Matters currently under review include:

  • Financial penalties of up to £5,000 for employers that lose at Tribunal.
  • Extension of the Acas Pre-Claim Conciliation scheme. Claimants will potentially be required to submit details of their dispute to Acas before filing a claim. Acas will have a duty to conciliate rather than a power.
  • Compromise Agreements to be simplified and to be renamed "Settlement Agreements".
  • Consultation on a Rapid Resolution Scheme which could potentially provide quicker and cheaper determination of low value straightforward claims.
  • It has been suggested that the whistleblowing rules should be amended so that disclosures about breaches of employment contracts are no longer covered.
  • The Government intends to consult on the introduction of "protected conversations" which will potentially allow an employer and employee to have frank and open discussions before disputes escalate.
  • The Government will be seeking views on a proposal to introduce "compensated no-fault dismissal" for companies with ten or fewer employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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