The penalties for not conforming to the latest developments in employment law can be severe for small to medium-sized businesses, with the maximum compensation for unfair dismissal increased to £50,000. To avoid the red tape employers need to spend more time on record-keeping and monitoring their systems.

The Employment Relations Act 1999 is probably the single most important piece of new legislation to arrive. Not only does it quadruple the maximum level of compensation for unfair dismissal from £12,000 to £50,000, it also reduces the qualifying period from 2 years to just 12 months. This development has resulted in many more claims going before tribunals, and with more people claiming, employers are fighting the claims because the penalties are higher than a year ago.

Dismissal refers to an employer ending an employee’s contract without renewal, and can be justified by the following:
a. conduct
b. capability
c. redundancy
d. a statutory requirement
e. some other substantial reason
The dismissal of an employee will be unquestionably unfair if it is for one of the following reasons:
a. Because the employee was, or proposed to become, a member of an independent trade union.
b. Because the employee was dismissed or selected for redundancy on maternity related grounds.
c. Because the employee took, or proposed to take certain specified types of action on health and safety grounds.
d. Because the employee refused to work in a shop or betting office on a Sunday.
e. Because the employee performed, or proposed to perform, any duties relevant to his/her role as an employee representative.
f. Because the employee was dismissed for taking, or seeking to take, parental leave.
g. Because the employee was dismissed or selected for redundancy for making a public interest disclosure.

The employer should always explain clearly to the employee the reason for the dismissal. The employer should always give the employee a proper opportunity to put their side of the case, even in a case of gross misconduct, and should take account of what the employee says before making any decisions about dismissal.
There are ways of avoiding the pitfalls as an employer:

a. Take a look at your procedures and processes and seek professional advice on where changes should be made to avoid employee claims.
b. Try to make sure that employees are not placed under undue stress; this may mean making an extra investment in training or hiring additional staff.
c. Keep accurate and detailed records of employee leave, benefits, appraisals and pay.
d. Make sure that your employees have written contracts, with included restrictive covenants if your industry is knowledge-sensitive.
It is imperative that anyone working for you has a proper contract of employment, as it is very easy to have an informal agreement until a crisis strikes. Especially for smaller companies, the problem occurs when employees absorb a lot of information, and then leave to join a larger or rival company. A contract with ‘restrictive covenants’ can offer some protection.