Few businesses appreciate the full impact an employee dispute can have on operations. Whether it’s time lost, stress and damage to reputation, or the full financial cost, an employee dispute can leave a business struggling long after the employee has gone. Unfortunately, the risk that an employment tribunal claim may be issued against your business is now greater than ever.
In 2017, employment tribunal fees were abolished. As we discussed at the time, the number of claims issued by employees quickly rose by 90%. Numbers have continued to rise every quarter since then, with the latest figures for January to March 2019 showing a further 6% rise in that quarter alone with 9,500 single claims being issued (up from 4,200 in the same quarter in 2015).
The ease and low cost of bringing a claim and the ever-changing nature of employment law means that there’s unlikely to be a sea change in these trends anytime soon. And, for the unwitting employer who finds themselves with an employee issue on their hands, the implications are a cause for concern.
So what are the implications? Clearly, in the case of a dispute and there is often a financial settlement. But the wider implications are much greater – they stretch far beyond the settlement figure, both financially and otherwise. Here are the major implications you need to consider…
Lost Management Time
ACAS estimate that ‘management’ spend 18 days on disciplinary cases and a further 14 days on grievance issues. That alone adds up to an astonishing 6.5 weeks of management time.
The latest Government statistics show that the time spent dealing with a claim once proceedings are issued is now 33 weeks (an increase of 3 weeks from last year). But that figure is misleading. In terms of an employee issue, the clock starts ticking as soon as the issue arises, with time spent trying to resolve it often long before a claim is issued, and time spent tying up any loose ends long after any proceedings are resolved.
All in all, an employee dispute that ends up in the tribunal is likely to take the best part of a year, if not more, to fully resolve on all levels. Even minor disputes can take up many months of management time. If you’re running a small or family-run business, the effect on productivity and the stress caused will be hard hitting.
The Legal Costs
The legal costs of defending a claim at tribunal will of course depend on the complexity of the case and length of time it takes to resolve. However, you can expect to pay at least £3,500 (plus VAT) for a straightforward claim and up to £10,000 (plus VAT) for something more complex. Legal costs of up to £24,000 or more aren’t unheard of.
If those figures leave a nasty taste in your mouth, bear in mind that they don’t include anything for any award made by way of settlement or if the applicant is successful. Neither do they include any orders for costs that might be made. In 2017/18 the size of costs orders (where the business is told to pay for costs incurred by the employee) significantly increased from £925 to £2,409 and, once again, this is a trend that is likely to continue.
In the same year, the awards made by tribunals for unfair dismissal and discrimination ranged from approximately £5,000 to over £30,000 with the overall average size of award at just over £15,000. The current statutory compensation award limit for an unfair dismissal claim is (the lower of) 52 weeks gross salary or £86,444. There is no limit on the compensation that can be awarded for a discrimination claim. So it’s not hard to see how the financial impact alone can be crippling.
Reputation and Damage Limitation
If lost productivity, time and escalating costs aren’t bad enough, then there’s the fallout to contend with. We’ve already written about the case of John Caudwell, which was played out in the public eye, causing no end of damage to his reputation despite the employee being only partly successful.
If a disgruntled ex-employee takes to social media to air their grievances, it can be very difficult to manage – notwithstanding the fact that they may not have had a legitimate grievance or a successful claim in the first place. The reputation you’ve spent years building up can be seriously damaged with a few careless words on Facebook, and it can also cause a high level of disruption amongst your remaining employees.
Unfortunately, most companies vastly underestimate the cost of recruitment. According to research by Quarsh (a leading UK recruitment resource provider) “the average hiring time is 10-12 weeks (from job opening to accepted offer), during which time the role is unfilled. For that period there is either no productivity, or productivity is provided by diverting someone else, likely the manager, or by using contract labour.” Assuming your lost employee was on a salary of £40,000, productivity loss can be as much as around £28,000 and employee cover can be £22,000 upwards.
Then of course, there’s management time spent on the recruitment process such as “specifying roles, reviewing CVs and interviewing, and, as over 50% of offers made are rejected, then repeating the process”. And there’s the actual costs of recruitment (as much as 20-30% of annual salary when using an agency) and advertising.
Then, finally, there is the lost time spent on bedding in and training the new hire (a high percentage of new hires leave within the first year), all of which means the actual costs of recruiting a £40,000 employee can be well over double that figure!
Time to Make Employee Relations a Priority
In 2016, ACAS research revealed that the prevalence of employee conflict does to some extent depends on external factors (such as funding, competition and regulatory requirements), and we certainly aren’t living in easy times when it comes to business.
The ACAS research also found that conflict management was rarely seen as a priority or problem until an issue escalated into a claim or grievance, and the general approach of employers was often reactive rather than proactive. Part of this reactive approach is often due to a reluctance to run up hefty legal fees by taking legal advice at an early stage, and an under-estimation of just how bad things can get.
It Doesn’t Have to Be That Way
Employment law changes on a regular basis. That makes it very difficult for an HR team or a small business to not only keep on top of changes, but also act on those changes, make amendments to procedures and policies accordingly and train and inform team members and staff.
Progeny’s Club Legal offers a more innovative approach to managing employee relations. Club Legal members receive unrestricted access to expert legal advice and corporate legal support through a fixed-fee annual subscription. This means that our Club Legal lawyers can assist you at any level and at any stage. We have an extensive range of expertise and experience and we’re always only a phone call away.
As a Club Legal member, you’re also eligible for valuable insurance, to cover the legal costs and compensation in the event of a tribunal claim. Businesses often aren’t aware that this type of cover is available, but it can be a complete life saver in the event of a claim against your business, where the insurer will step in and pick up the tab.
Review Procedures, Processes, Contracts and Training
Prevention is always better than cure and there are proactive steps you can take to protect your business. That may start with an assessment of your organisation and a review of your documents and procedures to ensure compliance with the latest legislation and best practice. It might also include training your staff, all of which alone can be significant when it comes to minimising the risk of an employee issue arising in the first place. Taking quality advice at early stage and being pragmatic and commercial with decision making is essential.
As a Club Legal member, you can access legal advice from the outset of an employee issue. This early intervention and support can be critical in ensuring you deal with the matter appropriately and swiftly as well as have all your ducks in a row to minimise the impact and improve your chances of success, should the matter result in a claim against you despite your best efforts. You’ll also have the benefit of our expert commercial advice when it comes to any settlement terms and how to contain and mitigate any negative publicity.
No Unexpected Fees
All of the above comes without the worry of spiralling and unexpected legal costs, because Club Legal is a fixed-fee service. What’s more, the Club Legal membership is totally flexible, allowing you to pick and choose only the services your business requires.
Time to Be Proactive
Unfortunately, employee disputes become part of any business at some stage. But keeping on top of employment law changes, being proactive and managing issues competently can also be a great force for good. It can position you as a good employer, improve your productivity, reputation and employee retention. We’d like to help you achieve that.