Will tribunal system changes really save £16m?

Oct 11, 2011 | Disputes

At the Conservative Party Conference last week, Chancellor George Osborne announced changes to the Employment Tribunal System which he claims will save British business £16m annually. Are you convinced?

Unfair dismissal service requirements to increase

From April 2012 the length of service an employee must accrue before they can make a claim for unfair dismissal increases from one to two years. The claim is that the change will encourage employers to recruit staff, however I really can’t see the link. There’s no evidence suggesting that most claims for unfair dismissal take place in the second year of service, and if a business can’t work out within a year whether or not the employment relationship will work, there are more significant problems.

I would also expect to see an increase in claims for discrimination, whistle-blowing, health and safety concerns and breach of contract, none of which require qualifying service and all of which are likely to be more costly in terms of time and money for employers. On a more complicated note it’s entirely likely the new rules may be subject to legal challenge on the grounds of indirect discrimination, as women and younger workers are both less likely to build up length of service.

There’s no doubt that many of my clients will welcome the change, feeling it will give them more freedom to manage their business. And there’s no doubt in the event of performance or attitude problems developing after a year or right on the year, not having that deadline will help. But I will be counselling clients carefully about procedure used and reasons for dismissal to minimise any risk of discrimination or other claims.

Introduction of fees to bring a claim

Also announced last week was the intention to introduce a fee for bringing an employment tribunal claim, a move which will be welcomed by many businesses. The proposal is for a fee of £250 upon issuing a claim, or more for claims seeking high compensation. A further £1,000 will be due when the claim is listed for hearing, although- poor’ claimants will either not have to pay upfront or will have the fee reduced. There’s no indication yet what- poor’ actually means.

There are several benefits or potential benefits to this. The civil and family courts system all currently require costs from the users of the services, while the employment tribunal system does not, so introduction of fees would on the face of it reduce the burden on the taxpayer. A fee would also hopefully deter unreasonable pursuit of weak or vexatious claims, and the structure of the fees could encourage early settlements, reducing the burden on the tribunal service.

However, it would be a shame if genuine claimants were deterred, and if important, valid but low-value claims didn’t see the light of day. There is also a concern that having to pay a fee would result in claimants cutting costs on their legal fees by representing themselves. Although it’s possible to do this, and the tribunal system is designed to be accessible without legal representation, there is no doubt that unrepresented claimants are more of a burden on the system.

It’s also not clear what proportion of claimants would actually have to pay the full fee, with breaks/exemptions for those on low/no incomes. As unfair dismissal compensation is based purely on financial loss, the majority of those bringing claims at the moment are those without income, without a job. Similarly many discrimination claims are combined with unfair dismissal or constructive unfair dismissal meaning the claimant is often without income. Either these claimants will be deterred by the fee or if their low income means they are exempt, the system will not benefit.

It will be interesting to see how the fee structure develops after consultation and whether there is a significant increase in claims with no service requirements after the qualifying period for unfair dismissal is raised. But I am not convinced these changes will save British business the £16million George Osborne claims they will.

For more information on how these changes will affect your business, including how you should deal with dismissals after April 2012, contact us at [email protected].