Stuart Gentle Publisher at Onrec

CIPD responds to Government announcement on ‘Settlement Agreements’

CIPD responds to Government announcement on ‘Settlement Agreements’: Better than Beecroft, but no substitute for best practice or basic common decency

CIPD responds to Government announcement on ‘Settlement Agreements’: Better than Beecroft, but no substitute for best practice or basic common decency

The government’s proposal on ‘Settlement Agreements’ merits careful consideration, and is a definite improvement on the blunt weapon of compensated no-fault dismissal proposed by Adrian Beecroft, according to the Chartered Institute of Personnel and Development (CIPD).

However, as the government publishes further details of what they are proposing and how it will work in practice, the CIPD says it is imperative that it is made clear that settlement agreements should be used to encourage better and more consistent performance management by employers, not as a substitute for it.

Mike Emmott, Employee Relations Adviser at the CIPD, said: “The principle that employers should be able to manage the performance of their employees effectively, without fearing expensive and time consuming tribunals, is a good one.  The reality that employment relationships sometimes don’t work out, and that compromise agreements can be used as a quick, face-saving way out for employees and employers is also recognised.  However, an employer’s first point of call shouldn’t be to stick a compromise agreement on the table and show staff the door if an employee’s ‘face doesn’t fit’. This can only have a corrosive effect on employee engagement at an individual firm level, and job security and its hand-in-hand relationship with consumer confidence at a macroeconomic level.  Perhaps most importantly, there is a law of basic common decency that says employers shouldn’t show employees that door for no good reason – undermining this risks undermining mutual trust and confidence in the workplace with catastrophic consequences for organisational performance and competitiveness.

“It is important that, in promoting these new proposals, the government exercises its duty of care to employers in not overselling or oversimplifying what it is doing here.  Employers need to understand that settlement agreements tabled in the context of without prejudice conversations will do nothing to protect them from discrimination or constructive dismissal claims if they act improperly.

“The government also needs to take extreme care to avoid the potential for a truly epic example of the law of unintended consequences.  While the proposal is intended to cut red-tape and make life easier for employers, without very careful drafting there is a very real potential for the creation of complex disputes and legal arguments about whether any given conversation or settlement agreement falls within the new regulation.  This could create far more disputes and red-tape than the proposal is intended to cut through. 

“In the final analysis, though, the simple message for employers is that, with or without ‘settlement agreements’ there is no substitute for good management and proper performance management.  Get that right, and there is no reason under the existing law why you can’t remove underperforming employees and replace them with the ones you need to drive your business forward”.