Business Law & Compliance

How the introduction of employment tribunal fees will affect SMEs

4 min read

18 July 2013

How will the introduction of employment tribunal fees later this month affect SMEs? Prolegal's head of employment, Adrian Hoggarth, explains.

Reforms aimed at improving employment tribunals have become a focus for the government. 

While new methods to resolve employment disputes such as mediation and arbitration are being championed by lawyers, going to an employment tribunal is still a popular and effective way to settle disputes between employees and employers. However, for many small businesses who are contributing to the recovery of the UK economy, an employment tribunal case can be cripplingly expensive and painfully drawn out. 

Last year, a review of the rules regulating employment tribunal procedures was carried out by the government. As a result, employment tribunal fees will soon be introduced, which will almost certainly bring down the number of claims being brought. 

Until now, employees could claim at almost no risk, many being supported by large organisations such as trade unions. This represents a step forward in reducing the number of undeserving claims being heard in court.

Introduction of fees: July 29

On July 29, 2013, fees will be introduced wherein employees will have to pay both issue and hearing fees that will vary depending on their claim. This means that employees will have to think twice about the claims they bring.

Employees will have to pay a minimum of £390 fees for simple claims such as unlawful deductions and redundancy payments, which could rise to £1,200 for more complex claims such as discrimination. Employees will not be the only affected party as this is also likely to have an effect on employers, who will no doubt be expected to repay the fees in any settlement payment, making it a more costly experience for all. 

SMEs in particular may find it difficult to address the new legislation as the pre-July 29 deadline will see a rush of claims being issued, after which the number is likely to reduce. 

Fewer nuisance claims?

While the change should diminish the number of nuisance claims, as employees will be less willing to risk the fees, it may also deter many claimants who have a valid claim but who cannot afford to pay. More complex claims will therefore be brought and this will slow down the process and persuade parties to explore alternatives such as pre-claim conciliation. 

For employees, the fees will prove problematic, particularly when it comes to the remission system. After July 29, there will be 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. 

As a result, SMEs will have to do more planning when faced with an employment claim while employees will have to be prepared to discuss the case with their employer before going to court. 

Spending time to assess the case on both sides can help quicken the process and reduce the amount of unnecessary fees and claims, which is undoubtedly positive for small businesses. However, getting around the new legislation, and spending time adhering to new laws, is always time intensive and more red tape is certainly something SMEs could do without.

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

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