What the introduction of tribunal fees means for small businesses

People wanting to bring employment tribunals must now pay a fee. Adrian Hoggarth discusses the ramifications for SMEs.

Disputes between employers and employees can be hard to settle. Ideally, they can be managed internally, without having to resort to the courts, but in many cases employment tribunals are the only remaining channel through which to resolve matters.

Small businesses can find employment tribunals cripplingly expensive and painfully drawn-out, particularly when the claim is viewed as bogus. Lawyers have been championing new methods to resolve employment disputes such as mediation and arbitration but recently the government has stepped in and improving the employment tribunals system has become a focus.

As of 29 July, the result of a review of the rules regulating employment tribunal procedures carried out by the government came into effect. Fees covering both issue and hearing, payable by the employee seeking resolution, have been introduced which will vary depending on their claim.

Until now employees could claim at almost no risk, many being supported by large organisations such as trade unions. This has escalated the number of spurious claims that have been brought, unnecessarily costing the tax payer and small businesses significant sums. The fees mean that employees will now have to think twice about the claims they bring which will almost certainly bring down the number of claims.

The costs break down like this: employees will have to pay a minimum of £390 fees for simple claims such as unlawful deductions and redundancy payments. This could rise to £1,200 for more complex claims such as discrimination. Employers will no doubt be expected to repay the tribunal fees in any settlement payment of successful claims, however, making it a more costly experience for all.

While the change should diminish the number of nuisance claims, as employees will be less willing to risk the fees, trade unions such as Unison do have a valid point in the need to uphold justice at all costs. Claimants who have a real claim but who cannot afford to pay must not be deterred from pursuing their cause in any suitable manner.

There will be exceptions to be made for those in certain situations, of course, but the remission system could make matters more problematic. There are many variables for possibly waiving or reducing fees. Factors such as income, disposable income, financial support from government and working tax credits will all play a role in determining the fees surrounding an employment claim that is brought to the tribunal. Employees will have to prepare financially well in advance and understand what they have to pay and what they can get support for.

The new fees will add to the burden SMEs face, as more internal planning will have to be undertaken before the legal route is sought. Employees will also have to be prepared to discuss the case with their employer before taking their case to court. The process can be quickened by spending time to assess the case on both sides and this can help reduce the amount of unnecessary fees and claims, which is undoubtedly positive for small businesses. However, SMEs are already overburdened with red tape and getting around the new legislation, and spending time adhering to new laws, is certainly something they could do without.

Further reading on tribunals

Adrian Hoggarth

Danny Prosacco

Adrian Hoggarth is head of employment law at City law firm Prolegal

Related Topics

Employment Rights

Leave a comment