Employers might be forced to defend a claim before the employment tribunal if a workplace dispute cannot be resolved. If an employee believes that you, their employer, has treated them unfairly or unlawfully, they have the right to complain to an employment tribunal.
Employment Tribunal fees were abolished in 2017 following a supreme court ruling to make justice universally accessible. Under the current rules, employees do not have to pay a fee to file a claim. Additionally, even if they lose and an employer wins, it is highly unlikely that the employee would be liable to cover the employer’s legal costs.
How much does an employment tribunal cost an employer?
There are a number of costs employers find themselves responsible for when defending a tribunal claim which can be categorised into the following areas:
Most tribunal claims can be complex and employers will need to instruct a lawyer or suitable legal representation in order to defend a claim successfully. The British Chamber of Commerce reported the average cost for employers to defend an employment tribunal claim is £8,500. Our experience is that the overall cost of defending an employment tribunal claim can be considerably greater for employers.
Defending a tribunal claim is time consuming, even with legal representation. Employers will still need to take time to collate and produce relevant documentation, liaise with legal advisors and take time out to attend the hearing. On average, tribunal hearings last between 1-3 days, however, more complex cases can last several weeks.
What compensation can employers expect to pay at employment tribunal?
As mentioned above, tribunal awards differ depending on the claim.
Unfair dismissal claims
Unfair dismissal claims are made up of a “basic award” and a “compensatory award”.
The basic award is calculated according to a formula based on the employee’s age, length of service and weekly pay (subject to a a cap). As of 6 April 2022 the maximum basic award is £17,130.*
The compensatory award is designed to compensate employees for loss of earnings as a result of having been unfairly dismissed. In the majority of unfair dismissal claims the compensatory award is subject to a statutory upper limit. As of 6 April 2022 the maximum compensatory award is £93,898 or 52 weeks’ gross pay if lower.*
For discrimination claims, there is no cap on compensation for loss of earnings awarded as a result of the discrimination, and a claimant can also claim for “injury to feelings”. A series of “bands” (known as the Vento bands) are used by a tribunal to set awards for injury to feeling and although technically uncapped, they rarely fall outside of these bands. As of 6 April 2022, the lower vento band begins at £990 whilst the upper band finishes at £49,300.*
In cases where an employment tribunal finds that an employer failed to follow the provisions of the ACAS Code of Practice on Disciplinary and Grievance Procedures, they can increase the value of the overall compensation awarded to an employee by up to 25%. Similarly, where an employee fails to follow the same provisions, an award can be decreased by up to 25%.
*Please note these change every April.
Can employment tribunal costs be reduced or avoided?
It is best to try and avoid an employment tribunal dispute in the first instance. However, for even the most diligent employer, sometimes they are unavoidable.
Here are our top tips to help avoid an employment tribunal:
Put in place well drafted employment contracts and policies that clearly demonstrate acceptable workplace behavior and which clearly set out how you as an employer will deal with any particular employment issue.
Well drafted contracts and policies
Put in place well drafted employment contracts and policies that clearly demonstrate acceptable workplace behavior and which clearly set out how you as an employer will deal with any particular employment issue. In the case of Disciplinary and Grievance Procedures, they should also follow the provisions ACAS Code of Practice. Effective policies will also go a long way in helping to avoid a claim. These should be easily accessible for your employees.
Well documented processes and decisions to show compliance
Ensure you follow all the correct procedures consistently and fairly. Document all of your formal meetings and clearly record your outcomes and decisions to demonstrate your thinking and compliance as an employer. These could be documented in an online HRIS system.
Mediation & Settlement agreements
It is possible to resolve disagreements before they reach tribunal, potentially reducing your costs. Informal methods such as mediation can help you reach an agreement before the issue is escalated. A settlement agreement may be the most cost effective option, especially for low value claims. You can also make use of the ACAS Conciliation process either before receiving a claim, or during the life of a claim.
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