Business Law & Compliance

Rise in tribunal employment costs for employers

3 min read

06 March 2014

The level of compensation an employment tribunal may award is due to go up on 6 April 2014 under the Employment Rights (Increase of Limits) Order 2014 (SI 2014/382).

The maximum compensatory award for unfair dismissal will rise from £74,200 to £76,574. The maximum amount of a week’s pay, used to calculate redundancy payments or various awards including the basic or additional award of compensation for unfair dismissal, also rises from £450 to £464.

Tribunals will also have the power to impose financial penalties of from £100 up to £5,000 on employers who are deemed to have breached a worker’s employment rights with aggravating features. What an aggravating feature looks like has yet to be defined as cases proceed. The Enterprise and Regulatory Reform Act 2013, in its bill form, suggested that aggravating features could include:

  • The size of the employer;
  • The duration of the breach of the employment right;
  • The circumstances of the case; and
  • The employee and employer’s behaviour.

It also stated that a tribunal may be more likely to find that there are aggravating features where:

  • The action was deliberate or committed with malice;
  • The employer was an organisation with a dedicated human resources team; and/or
  • Where the employer had repeatedly breached the employment right concerned.

A tribunal may be less likely to find that there are aggravating features where an employer:

  • Has been in operation for only a short period of time;
  • Is a micro business;
  • Has only a limited human resources function; and/or
  • Made a genuine mistake.

The tribunal shall judge an employers’ ability to pay and the penalty shall be paid to the Secretary of State. This initiative will be implemented on 6 April and shall apply to claims lodged on that day and thereafter. Even where no financial award has been made the employer may be required to pay a financial penalty anyway.

This may not be a welcome change for employers where the government has pledged to reduce red tape. However, it has been said that the existing employment tribunal system is employer friendly (although not many employers will say that). The introduction of costs against an employer will be balanced out by the fees introduced for claimants to pay to lodge a claim. Recent case law has shown that successful claimants will also recover tribunal fees from a respondent with a costs order.

Sandra Beale is an FCIPD qualified HR consultant providing HR and employment law support to SME businesses with issues such as grievance, disciplinary, dismissal, TUPE, redundancy, poor performance, etc.