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Employment tribunals: legislation changes

An employment tribunal is every SME’s nightmare. The Government has made changes but is the process any easier?

In a bid to ease the burden on businesses and reduce the number of frivolous claims employment tribunal fees were implemented in July 2013 and require claimants to pay both an issue fee of up to £250 and a hearing fee of up to £950 (depending on the claim).

There has already been a significant impact on the number of tribunal claims being brought, with recent reports showing a drop off of up to 70% since the fees were introduced. This has clearly been of benefit to business, with less time and money being spent on claims. Government figures show that claims for race discrimination fell by 59%, sex discrimination claims by 81%, unpaid wages claims by 80%, and unfair dismissal claims by 62%.

Employment legislation

Reducing the unfair dismissal cap has also been good news for employers. In 2013, the maximum compensation payable on unfair dismissal was changed to be the lower of the statutory cap (currently £78,335) and 52 weeks’ pay.

With average earnings at just over £26,000 a year (according to the Office for National Statistics), this has reduced the potential exposure for most employers, making it easier to manage the expectations of employees on termination. This, in turn, helps reduce the number of claims and assists in settling at lower figures.

The ACAS early conciliation process, introduced in April 2014, should also benefit business. Emma Bartlett, partner at Charles Russell Speechlys law firm, notes: “If both parties engage in conciliation, this can reduce the need for subsequent litigation, saving businesses in terms of management time as well as costs.”

The other significant and controversial measure is the proposed introduction of equal pay audits.  In October 2014 a power to enable tribunals to order employers who are found in breach of equal pay laws to carry out equal pay audits was passed. “This only relates to equal pay claims presented since that date and does not apply to micro businesses with fewer than 10 employees so it is not clear yet whether they will prove to be a burden for business,” Bartlett explains.

Lucy James, director of Quash, a recruitment process outsourcing provider says that addressing the gender pay gap will not be easy for SMEs. “It is tremendous that the government is finally acting positively on the gender pay gap and demonstrates a real shift in thinking which is long overdue,” she says. “However, the impact on business should not be underestimated as it will be very difficult to equalise salaries down, rather than up, which could impact on profits. “

Neil Carberry, director for employment and skills at the CBI, says that fixing the employment tribunal system remains a priority for businesses of all sizes. “Recent reforms aimed at encouraging early resolution of disputes, such as Early Conciliation and the introduction of fees, are steps in the right direction,” he says. “But fees need to be set at the right level to ensure legitimate claimants are not put off, and, more broadly, simplifying and speeding the work of employment tribunals would be in the interest of employer and employee alike.”

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