Employment Tribunals Cost UK Businesses £1.6bn in 2010

Employment Tribunals Cost UK Businesses £1.6bn in 2010

High Costs and Poor Understanding Leave Businesses on Back Foot

- Only one in twenty HR professionals fully understand the UK employment tribunal process

- One in five businesses settle all employment tribunal cases before they go to court

- Only one in four HR professionals aware of the government’s proposals to change employment tribunal process

Employment tribunals cost UK business £1.6bn in 2010 and only one in twenty HR professionals fully understands the UK employment tribunal process according to research from Ambition, the global specialist recruiter.

A survey of over 200 HR managers and directors found that while the majority of HR professionals (80%) have some understanding of the tribunal process only one in twenty (5%) understands the process fully and three in twenty HR professionals have no understanding of it at all (15%).

The average cost for an employer to defend themselves at tribunal – regardless of whether the business wins or not – is £8,500 while the average settlement is £5,400. Three-fifths of claims are settled before going to court. In 2010, over 236,000 employment tribunal claims were made in the UK at a cost of nearly £1.6bn to UK businesses. While much of this will be legitimate compensation a significant proportion is due to the cost of settling spurious claims because many businesses do not know where they legally stand and find it easier to settle rather than drag a case out through the court.

Commenting on the research, Tim Gilbert, UK managing director of Ambition, said:

“A combination of high costs, lack of understanding and the worry over bad publicity means the majority of UK businesses decide to settle employment tribunal claims well before they end up in court. This has left UK businesses £1.6bn out of pocket, money which could have been reinvested in order to create jobs and growth in the economy. As it stands, the employment tribunal process is a dead weight around the neck of UK businesses.”

The research comes shortly after the government set out its proposals to amend the employment tribunal process in order to remove ‘deterrents’ for small businesses to hire staff. The changes include raising the qualifying period for employees from one to two years and introducing fees for bringing a tribunal claim. However, when asked about the changes to the process only one in four HR professionals said they are aware of the government’s proposals. Of those who are aware of the changes half felt they would make no difference to their business while 17% felt they would increase their businesses expenditure on employment tribunals.

Gilbert, continued:

“The government has so far been woefully short of policies to help encourage business growth in the UK and now they’ve finally come up with some ideas they’ve failed to engage with businesses in order to get their backing. Not only is the current employment tribunal process heavily weighted towards the employee but it’s a process that very few businesses fully understand. The proposed changes are a start towards a more balanced system but more needs to be done to encourage businesses to create jobs.”

Ambition, in conjunction with London law firm Travers Smith, today ran a mock employment tribunal in front an audience of HR professionals. The event was organised to demonstrate part of employment tribunal process and to give HR staff the opportunity to ask the judge and barristers questions regarding employment law issues.