Employment Protection (Variation of Limits) Order 1992

HL Deb 05 February 1992 vol 535 cc331-5

7.32 p.m.

The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater) rose to move that the draft order laid before the House on 19th December be approved [8th Report from the Joint Committee].

The noble Viscount said: My Lords, in moving this order, I shall speak also to the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1992.

The draft Employment Protection (Variation of Limits) Order 1992, has been laid in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978. Section 148 requires the Secretary of State to review in each calendar year the upper limit on the amount of a week's pay for calculating redundancy payments, the basic and additional awards for unfair dismissal, and debts that can be paid under the insolvency provisions of the Act. These limits are all subject to annual review.

The legislation also requires the Secretary of State to review the limit on the amount of guarantee pay due to an employee in respect of any day on which he is temporarily laid-off. In carrying out the review the Secretary of State must consider: the general level of earnings in Great Britain at the time of the review; the national economic situation as a whole; and any other matters he considers relevant. Although the legislation does not require him to do so, the Secretary of State has followed the practice of previous years and consulted a wide range of outside organisations about the review. Employers' organisations generally argued that if there was to be any increase it should be no higher than the rate of inflation. Other organisations were in favour of higher increases.

We have taken into account these views as well as economic factors in proposing all the increases before the House. In reaching our conclusions, we had in mind that one of our prime anxieties is to encourage employment by reducing the burdens on businesses; yet at the same time we are committed to safeguarding the essential rights of employees. The proposed increases strike the right balance between the interests of employers and employees. We propose that the limit on the amount of a week's pay should increase from £198 to £205, and the limit on the daily amount of guarantee pay from £13.65 to £14.10.

The Secretary of State is also required to review the limits on the duration of guarantee pay, which is currently limited to five days in any three month period. None of the organisations consulted saw a need for any change in this arrangement, nor do we propose any change. My right honourable friend the Secretary of State for Employment laid a report at the same time as the draft orders, in which he explained why those limits would not be altered.

I now turn to the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1992. This has been laid before the House in accordance with Section 73(4B) and Section 75A(7) of the 1978 Act. These limits are not subject to annual review, but may be reviewed from time to time. The awards covered by this order apply to dismissal for trade union membership or activities, or non-membership of a union. These important provisions were introduced in order to protect the individual's right to choose whether or not to join a union.

The awards were raised last year and we consider it right to increase them again, albeit by a modest amount, so that they remain a significant deterrent against employers discriminating against their employees on those grounds, and we propose a modest increase for the forthcoming year. The minimum basic award will be increased from £2,650 to £2,700 and the limits which apply to the calculation of the special award will be increased from £13,180, £26,290 and £19,735 to £13,400, £26,800 and £20,100 respectively.

The limits on compensatory payments are not subject to annual review and are normally increased every other year. They were substantially increased in 1991, and we do not propose any further increase this year.

Moved, That the draft order laid before the House on 19th December be approved [8th Report from the Joint Committee]. —(Viscount Ullswater).

Lord Dean of Beswick

My Lords, I am grateful to the Minister for his lucid and detailed explanation of the purpose of the two orders. I do not propose to detain your Lordships' House for long because we welcome the fact that the limits are to be up-rated.

However, the Minister said that there had been consultations with various organisations. I believe there were consultations with the Trades Union Congress, which has an interest in this subject because of its members. It is worried about the limits on one week's pay in the variation of limits order being increased from £198 to £205. That figure is used to calculate both redundancy and unfair dismissal payments. As that is a maximum level, it means that anyone made redundant who was earning more than that limit would receive a maximum of £205. That is to the disadvantage of those on higher earnings.

More importantly, it is pointed out that that could be disadvantageous as regards unfair dismissal. They note the comments made by the noble and learned Lord, Lord Donaldson. At least, I assume that they mean the noble and learned Lord, Lord Donaldson of Lymington, who is the Master of the Rolls. I do not know whether his comments were made in that capacity or in his capacity as chairman of the Industrial Relations Court.

The TUC notes the comments of the noble and learned Lord that, where higher paid employees are involved, the current limits could positively discourage employers from complying with reinstatement orders. An employer may prefer to go to a tribunal on an unfair dismissal case and risk being found guilty, as the usual remedy in such cases is a requirement to pay compensation at only £205 per week.

The TUC notes the Law Society's view that there is no case for retaining the limits on a week's pay and says that that view is persuasive. Alternatively, the Government must ensure a substantial increase in the levels of compensation. The size of the increase on the limits on a week's pay is only 3.5 per cent., which is far below the rate of inflation and the increase in average earnings.

The TUC consistently argues that failure to update the financial limits in line with either average earnings or retail prices has, over a period, undermined the effectiveness of employment rights. On page two of the memorandum from the Department of Employment (Variation of Limits order), it states, The reasons for not varying two of the limits relating to the guarantee payments provisions are set out in a report to he laid before both Houses of Parliament simultaneously with this Order". I have said as much as I ought on the matter. I have given a couple of points of view that the TUC may like the Minister to dwell on regarding the disadvantages to the amount people would normally expect to earn on a weekly basis in excess of what the provisions state, even when the upgrading is taken into account. Having said that, perhaps the Minister could give us a brief explanation. I accept that because of the uprating we shall support the order and to some extent we welcome it.

Lord Hampton

My Lords, we on these Benches support both the orders.

Viscount Ullswater

My Lords, I am grateful that both the noble Lords, Lord Dean of Beswick and Lord Hampton, welcome the upratings. That is the purpose of moving the orders. I thank the noble Lord, Lord Dean, for explaining some of the problems, albeit small ones, experienced with the level of the uprating.

It is true to say that the Government have consulted fairly widely on the matter. On the employees' side they consulted the Council of Managerial and Professional Staffs, the Federation of Managerial and Professional Associations, the EETPU, the RCN and the TUC. I hope that that satisfies the noble Lord, Lord Dean, that a good broad sweep of union opinion was canvassed. Whereas he reports that they have commented that the upratings should be higher, perhaps I can explain a little why the Government perhaps take a contrary view.

We believe that industrial tribunals have an important role to play in our society and it is right that individuals should have such a means of claiming their employment rights. The Government are firmly committed to that. On the other hand, it is not the Government's intention that there should be an unlimited statutory right to redundancy payments or unfair dismissal awards. The possibility of limitless claims would make employers reluctant to recruit and therefore reduce the number of job opportunities available. That was a point raised by the noble Lord, Lord Dean.

We are aware of our responsibility to promote a climate where business can flourish and continue to grow with the resulting benefits to employers, employees and job seekers. The review of limits must be seen in that wider context. At the end of the day the correct level of increase, and the noble Lord mentioned increases of 3.5 per cent., is a matter of judgment, taking into account the various factors to arrive at a sensible position. In my opening remarks I outlined the criteria by which the Secretary of State has to make a judgment.

We believe that employers should have some protection from these astronomical claims and it is right that the amounts proposed within the orders are the correct ones.

Lord Dean of Beswick

My Lords, before the Minister sits down, perhaps I can express my appreciation for the detailed way in which he dealt with the small points I raised. I have no doubt that those on whose behalf I raised the points will, in the next period when the matter is reviewed, put the points during the consultation better than I was able to. Having said that, we welcome the Minister's reply and the two orders.

Viscount Ullswater

My Lords, I commend the order to the House.

On Question, Motion agreed to.