House of Lords - Explanatory Note
Employment Relations Bill [H.L.] - continued          House of Lords

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Clause 29: Indexation of amounts, &c.

280.     Various payments and employment tribunal awards which fall due under the 1992 Act and the 1996 Act are subject to minimum and/or maximum limits. Currently some of these limits are required to be reviewed each calendar year (for example, the limit on a week's pay used in calculating statutory redundancy payments and the basic and additional awards which may be made when unfair dismissal is found). Other awards and payments are not required to be reviewed annually but may be increased at the Secretary of State's discretion (for example, the compensatory award in unfair dismissal cases). This clause provides that limits on these payments and awards will instead be index linked.

281.     Subsection (1) sets out the awards and payments to be index linked. Subsection (2) provides that the limits on these payments and awards will be linked to changes in the retail prices index, using the September index in each year as the reference point, with changes being made by order as soon as is practicable. Subsection (3) provides that limits will be rounded up when they are varied as a result of subsection (2). Subsection (5) defines the retail prices index for the purposes of the clause and makes provision for what should happen in the event of non-publication. Subsection (6) sets out the order-making procedure for orders under subsection (2).

282.     Subsection (4) substitutes a maximum limit of £50,000 (subject to subsection (2)) on the compensatory award for the current limit of £12,000 (section 124(1) 1996 Act as amended by the Employment Rights (Increase of Limits) Order 1998, SI No 1998/924). The great majority of compensatory awards are currently below the £12,000 limit but in a few cases this limit means that individuals cannot be fully compensated for their loss. The raising of the limit will substantially reduce the likelihood of this happening. In Fairness at Work, the Government announced its intention to abolish the limit altogether, but it was subsequently decided not to do this in the light of concerns expressed during the consultation about ill-founded claims, burdens on business and employment prospects.

    Special awards are dealt with in sections 118 and 125 of the 1996 Act and sections 157-158 of the 1992 Act; additional awards are dealt with in section 117 of the 1996 Act; and compensatory awards are dealt with in sections 118, 123-124 and 126-127 of the 1996 Act.

Clause 30: Guarantee payments

283.     Guarantee payments are made to employees for days they are laid off provided certain conditions are met. The payments are made for up to five days in any three month period (sections 31(2)-(4) of the 1996 Act). These time periods are currently required to be reviewed each calendar year. This clause amends section 31(7) of the 1996 Act to provide that the time periods specified in sections 31(2)-(4) may be varied by order subject to negative resolution procedure and will no longer be subject to annual review.

    Guarantee payments are dealt with in sections 28-35 of the 1996 Act.

Clause 31: Sections 28-30: consequential

284.     This clause repeals the existing powers for increasing certain limits and the current annual review requirement in respect of other limits. It also sets out the position with regard to any increase made under these repealed provisions before the index linking provisions in clause 29 come into force.

Clause 32: Compensatory award etc: removal of limit in certain cases 285.     This clause provides that no monetary limit will apply to the compensation payable where an employee is unfairly dismissed or selected for redundancy for reasons connected with health and safety matters (see section 100 of the 1996 Act) or public interest disclosure ('whistleblowing' - see section 103A, inserted in the 1996 Act by section 5 of the Public Interest Disclosure Act 1998 (this section has not yet been brought into force)). Subsection (2) therefore repeals the power in section 127B of the 1996 Act (inserted by section 8 of the Public Interest Disclosure Act 1998) to provide in regulations for the calculation of compensation in the case of whistleblowing. Any regulations made under that power will therefore fall.


286.     Clauses 33 to 38 contain various general and consequential provisions.


287.     The Bill will have a small effect on public sector finances. Savings are likely from ending the annual consultation on limits for statutory awards and payments and abolishing the Commissioner for the Rights of Trade Union Members (CRTUM) and the Commissioner for Protection Against Unlawful Industrial Action (CPAUIA).

288.     Increased expenditure will result from the extension of the Certification Officer's powers (although this increase is expected to be less than the estimated saving in the annual £320,000 expenditure of the two Commissioners) and from the extended duties which will fall to ACAS and the Central Arbitration Committee (CAC) as a result of the Bill. In respect of ACAS, this could result in additional running costs of up to around £250,000 in a full financial year. The likely additional costs for the CAC are still under discussion but are expected to represent a substantial increase in its current running costs of around £94,000 per year. Employment tribunals may experience a small increase (around 350 cases per year, or less than 1% of the current level of applications) in their workload from workers who have been denied their rights to parental leave and time off for domestic incidents, but there are also expected to be reductions in workload from the simplification of maternity rights, the right to be accompanied in disciplinary and grievance procedures, union recognition, and the clarification of rights for part-time workers (which may reduce the numbers seeking to claim sex discrimination). So the net increase in tribunal costs is likely to be negligible.

289.     Raising the entitlement of standard maternity leave from 14 to 18 weeks will result in claims for maternity benefits (in the region of £1.8m per year) but this will not affect DSS forecast expenditure. There may be an increase in the take up of income-related benefits which it is estimated is likely to cost in the region of £10 million per year, depending on the details of the regulations.

290     Detailed proposals are currently being worked up for a fund to promote partnerships at work under the authority in clause 27 of the Bill. The exact level of funding has not yet been decided but it will be met for the next three years out of the DTI budget agreed as a result of the Comprehensive Spending Review.


291.     The Bill is likely to have a small effect on public service manpower, arising from the expected increases in the workloads of the CAC, ACAS and the Certification Officer. The CAC will experience the largest increase in its workload due to new work arising from arbitration in recognition cases. ACAS's work on collective conciliation, in comparison to the rest of its work, will rise by a small amount as will the work of the Certification Officer in respect of his extended powers. These increases are expected to have a minimal impact on public service manpower.


292.     The annual compliance cost to industry is estimated to be in the region of £60m recurring and £1.7m non-recurring. This depends very much however on assumptions about the take-up of new entitlements.

293.     In some areas where the legislation is new, there is little evidence on which to make estimates. This is particularly true for the introduction of statutory TU recognition procedures and for the right to parental leave. The main element of recurring costs is expected to arise from parental leave provisions (around £29m).

294.     Non-recurring costs of trade union recognition procedures are estimated to be £1.7m, some of which will result in recognition and consequent recurring costs (associated with the procedures which follow from recognition). It is estimated that after recognition procedures have been in place for three years these could be £6m per year, though these are gross costs and do not take account of any consultation and negotiation that would take place anyway.

295.     The improved maternity provisions (the increase in standard maternity leave from 14-18 weeks, and additional maternity leave) are estimated to add about £15.8m to employer costs (comprising £14m in respect of additional maternity leave and £1.8m in respect of standard maternity leave).

296.     Most of the provisions in the Bill affect only a small proportion of employers as they provide a statutory underpinning for benefits and practices which are already very widespread.


297.     Clause 36 provides for the provisions of the Bill to be brought into force by commencement order. It is intended that the various provisions will be brought into force as soon as possible once the necessary preparatory measures have been taken, for example by issuing codes of practice or carrying out consultation on regulations. In particular, it is intended that the provisions on parental leave should be commenced in time for the new regulations to be made under them to enter into force by December 1999 and that those in respect of part-time work should be commenced in time for the regulations under them to enter into force by April 2000.


298.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement before second reading about the compatibility of the provisions of the Bill with the Convention rights (as defined in section 1 of that Act). On 8 April 1999, the Lord Simon of Highbury, the Minister of State for Trade and Competitiveness in Europe, made the following statement:

    In my view, the provisions of the Employment Relations Bill are compatible with the Convention rights.

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Prepared: 22 April 1999