Why it could now cost more to sack an executive in the UK than FRANCE

Labour’s overhaul of employment rights, particularly the removal of the unfair dismissal compensation cap, could leave British businesses facing a higher bill for dismissing executives than their European counterparts.

As the government pushed its Employment Rights Bill into law, it ditched the £118,000 compensation limit on unfair dismissal claims to appease unions after the House of Lords forced it to extend its ‘day one rights’ manifesto pledge to six months.

From January, the unfair dismissal compensation cap will be £123,543, or one year’s pay.

Speaking at City AM’s Breakfast Briefing, Caspar Glyn KC, of Cloisters, said: “I don’t understand it because they could have just moved the cap to £200,000 and 104 weeks. That would have been really eye-catching, wouldn’t it? But just peeling off the cap doesn’t make sense to me; it has never been the case here and isn’t the case for any of our European counterparts.”

As a result, he explained, “for the first time, dismissing someone in the UK could be more expensive than dismissing someone in Spain, France, and Germany.”

The senior employment Silk pointed out that “London was a great market in which to employ. It’s one of the great cities of the world and hugely well connected.” But Glyn KC explained that the removal of the cap on unfair dismissal is a real risk now if you’re going to employ an executive; should businesses be thinking about employing them in Frankfurt, Madrid, Barcelona or Paris, rather than London?

A clear-out of senior talent

In response to the reforms, businesses have been quietly clearing out highly-paid staff ahead of these expensive changes coming into force.

The reforms also includes contractual bonuses, benefits (including pensions), equity and carried interest, making future redundancy packages look hefty.

Speaking to City AM in July, Merrill April, partner at CM Murray, said law firms have seen a “massive uptick in inquiries” from top staff exploring their legal options after being told they face the chop. “What’s remarkable about it is the volume of people being asked to go across all sectors… but also I think the unceremonious rush to get it done,” April added.