With the number of employment tribunals increasing – last year saw the highest ever number of claims – the average cost for an employer to defend themselves at tribunal is £8,500. However, the average settlement is £5,400, often making it cheaper for employers to settle, even if faced with a spurious claim.
Research shows that, overall, 58 per cent of cases were settled, two-fifths through Acas and one-fifth privately.
Rather than fearing losing the claim, the main reasons employers that over half settled was to keep costs down, with 25 per cent saying that they had done so for convenience.
While there are provisions to allow businesses facing unmeritorious claims to reclaim costs, the number that do so are miniscule, and have decreased each year since 2004/05.
Commenting on the research, Dr Adam Marshall, Director of Policy and External Affairs at the BCC, said: “The employment tribunal system is in dire need of reform. Currently, tribunals are too slow and overwhelmingly weighted in favour of the employee – whereas they should be fair for employers and employees alike.
SME employers across the UK are now saying that the current tribunal system creates risk and uncertainty, which is becoming a barrier to job creation because it distracts businesses from focusing on growth.
“The current system is perverse – forcing businesses to settle spurious claims rather than fight them, simply because it is more cost effective for them to do so. And those costs go beyond legal fees. The reputational impact of a tribunal can be hugely damaging to a business, particularly as they can be stretched over several months” added Marshall.
Marshall concluded by saying “We urge the Government to review the current system and consider introducing a fee for claimants to discourage spurious and baseless claims. Ministers must also commit to reducing the wait time for a first hearing – and making the system less of a barrier to business growth.”