Costs warning to SMEs over tribunals surge

Businesses are being warned to ensure their human resources processes are watertight or face expensive consequences. This follows a recent explosion in the number of people taking their employers to employment tribunals.

Hannah-Jane (H-J) Dobbie, Head of HR Consultancy at UK Top 10 accountancy firm Azets, says this includes claims for failing to follow a proper redundancy process, wrongful dismissal, unfair dismissal, discrimination, and additional claims for injury to feelings.

H-J said: “Employees with grievances appear to be far more likely to take matters further than they would have been in the past. And the onus is on the employer to disprove the claim, rather than the employee to prove it, which can be difficult.

“I believe it is very much due to the state of the candidate-driven recruitment market. People know that they can walk out of a job, make a claim, and still walk into another job, potentially quite quickly, especially if they have an in-demand skill set.”

Latest ONS figures put the UK employment rate at 75.6% and rising, with unemployment at just 3.8%. Estimated job vacancies are 1.3 million.

H-J added: “We are in a society where people don’t necessarily accept the answers they are given any longer, and will challenge their employers and try to get more – most of it seems to be for financial gain. We are also seeing larger claims than we would normally expect to see.

“There are a lot more claims coming forward which would likely never have got to the tribunal hearing stage previously. A lot of them, I would say, are spurious claims, or employees trying their luck, but it seems to be becoming the way of the world and we are edging towards the USA’s claims culture.

“Many more employees are taking a chance on taking tribunal action. It doesn’t cost them anything to go to a tribunal. However, the average cost for fighting a tribunal for an employer – without including any awards made – is around £10,000 per day once you include legal fees, and the management time and resources taken up dealing with such matters.

“My concern is that it has got to the point where people see you can make a quick buck by doing something like this and therefore, they are jumping on the bandwagon. Even people dismissed during their probationary periods are raising tribunal claims these days.

“Companies with money may choose to fight claims they know, or suspect, are wrong. For smaller businesses there can be a grave financial risk in going to tribunal – that’s why many are taking advantage of the ACAS early conciliation process and settling prior to any preliminary tribunal hearing, even when they know they have a case, as the time costs alone are prohibitive.

“I know of several incidences of SME clients who have ended up paying out sums of money in a settlement just to make a situation go away, even though they know they have done nothing wrong.”

H-J, who has more than 20 years’ HR experience adds: “Everything has changed in the last two years, much of it driven by covid, and not all of it is for the better. People are now more than ever considering their options and challenging things rather than accepting an employer’s decision.

“There are a lot of issues crawling out of the woodwork – many people have come back into work after two years away, so all the little gripes and grumbles are coming to the fore and performance is being more closely monitored – all at a time when employers may be less tolerant due to the need to cut costs because of inflation.

“Employees think they have the right to work when they like, how they like and where they like now – which is not quite the case. Employees certainly don’t get to hold all the shots, but they think they do.

“Recruitment agencies are saying candidates will not touch a job unless they can work from home at least a couple of days a week – people are not interested in being in an office environment full time and businesses have to adapt to this if they want to attract and retain the best talent in their sector.

“This whole situation leads to a great many genuine cases that must be getting held up in the system due to the backlog in cases.”

Latest HM Courts and Tribunals Service statistics show the wait time for a single claim tribunal is around a year and deep into 2024 for multiple claims in some regions.

H-J’s advice to SMEs and other businesses is to be scrupulous in dealing with all human resources matters.

“When you are making decisions about terminating an employee’s employment, regardless of the reason why, you need to make sure a) you are following proper process and b) that you are, where appropriate, following the relevant ACAS Code of Practice.

“This is also a warning shot across the bows to businesses with regards to discrimination, whistleblowing, and having a contract or at least a written statement of particulars in place from day one, any of the things that are day one rights for employees, where they don’t need two years of service to make that claim.

“It is extremely easy now for employees to make claims and it is becoming harder for employers to defend them. If you want to make certain decisions make sure you seek advice and follow a proper procedure to avoid putting yourself in a demanding and potentially expensive situation.”

The ACAS code of practice on discipline and grievance is particularly important, as if the employer is found to have not followed it then any award made at a tribunal can be increased by up to 25%.

The latest HM Courts and Tribunals Service user group report, issued in March and hampered by a lack of reliable data since spring 2021 due to ongoing problems surrounding a change in case management systems, paints a varied picture across regions.

As of January, all regions could list shorter tribunals of one to two days’ duration within a year, but for longer hearings the situation was worse. The North East, London Central and Wales were booking within a year, but in the Midlands East, Midlands West, the South West and most parts of the South East, the wait time was more than a year.

A basic fee of £12,000 to a claimant for a tribunal was introduced in 2013, causing a 70% drop in cases, but it was repealed by the Supreme Court in 2017 after a campaign by the union Unison as they believed it restricted legal access to a considerable number of people with legitimate claims. Case numbers then rose sharply again.

Azets is the UK’s largest regional accountancy and specialist business advisor to SMEs and hugely experienced H-J, a fully qualified member of the Chartered Institute of Personnel and Development (CIPD), helped launch the firm’s hands-on, one-stop shop’ HR consultancy service for SMEs early last year.

The new venture, aiming to help SMEs meet their core HR needs, including bespoke advice and support on a wide range of HR-related issues such as grievances, recruitment, compliance, procedures, restructuring, policies, and handbooks, led to Azets hiring several additional staff and the team is continuing to expand as demand for their services increases.