Enterprise and Regulatory Reform Bill published

The Enterprise and Regulatory Reform Bill started its passage through Parliament today, confirming the government’s commitment to binding shareholder votes on executive pay and tribunal reforms.

A preview of the Bill’s contents was aired in the Queen’s speech, but details of the actual legislation only emerged today.

Employment tribunal reforms are top of the agenda, as the government is keen to reduce the cost of the process for businesses. 

Under the Bill, all parties involved in any workplace dispute will be encouraged to try and resolve the situation through early conciliation and the greater use of ‘Settlement Agreements’ – which were formerly called Compromise Agreements. 

The government said it had changed the name because “we believe this more accurately describes an agreement that is about delivering a satisfactory solution for both parties”. 

In addition to these measures, a new ‘Rapid Resolution’ scheme will be set up to deal with less complex cases to make the process quicker and cheaper for employers and workers. 

The legislation also tackles the disconnect between directors’ pay and long-term company performance by giving shareholders of UK quoted companies binding votes on directors’ remuneration. 

The government hopes the new power will encourage shareholders to be more engaged in remuneration policy and that their companies will heed what they say.

The number of health and safety inspections will also be reduced to cut the burden on employers.

Business Secretary Vince Cable, who presented the Bill to Parliament, said: “Growing our economy out of a period of acute crisis is the most pressing issue for this government. We want to make sure the right conditions are in place to encourage investment and exports, boost enterprise, support green growth and build a responsible business culture. 

“The measures in the Bill will help make Britain one of the most enterprise-friendly countries in the world. It will improve our employment tribunals, reform and strengthen competition enforcement, scrap unnecessary red tape and help ensure that people who work hard and do the right thing are rewarded.”

Audrey Williams, partner at law firm Eversheds, said there was little in the Bill that would surprise employers as its measures on tribunal reform and dispute resolution had been widely trailed. However, she said one interesting aspect of the drafting was that the government was taking over the power to change the cap on tribunal compensation limits.

“If passed, the Bill will give government ministers power to revise the cap on so called ‘compensatory awards’ that employers can be ordered to pay for unfair dismissal,” said Williams. 

“This suggests the government could well be planning to reduce the cap to bring down the level of awards at the upper end of the scale, at least for smaller employers, if not for all. In practice most compensation awards fall well below the upper limit. Nevertheless, employers will undoubtedly welcome any move to reduce the cap, which currently stands at £72,300.”

Much of the detail on executive pay and shareholder votes is still to be supplied, said Katya Hall, chief policy director at the CBI.

"We will judge the changes proposed by the Government on whether they give shareholders the right information and powers to hold companies to account,” said Hall. “The test for us has always been that changes should not blur the roles of shareholders and boards in a way that slows decision-making, or diverts management attention at a time when the focus should be on growth."