Employment relations minister Jo Swinson said the change would be introduced in an amendment to the Enterprise and Regulatory Reform Bill, which is currently going through parliament.

Ms Swinson said: “Employment tribunals are costly for everyone, in terms of money but also time and stress.

“We need to tackle unrealistic expectations about the levels of compensation awards, especially when only one in 350 people who make a claim for unfair dismissal receive an award of more than their own salary, and the average award is less than £5,000.”

The change is one of several new measures designed to reduce the number of workplace disputes that reach employment tribunals. The Government also wants to introduce a new statutory code and guidance to encourage greater use of settleme
nt agreements.

Ms Swinson said: “Settlement agreements can be a helpful tool and work in the interest of both employer and employee. Creating a code and simple guidance will mean that these arrangements are more readily available to those in small businesses, not just large corporations.”

The current moves are part of the Government’s continuing attempt to ease the burden of employment claims on businesses. Last year, the period in employment required before employees can make a claim was increased from one to two years.

The Government has also announced that employees will soon have to pay a fee to bring a claim to a tribunal.

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