With a staggering 186,300 claims accepted by Employment Tribunals during 2011-12 and many thousands paid out in compensation to successful claimants, businesses are needing to wise up to measures that can protect them from costly and time consuming claims.

Indeed, the financial costs for businesses in defending claims can be equally alarming with eye wateringly high solicitor fees and a significant amount of company time and stress spent preparing the defence.  And the risks do not stop there; the damage to your Company’s reputation can be severe if the details of an employee’s successful claim are published in the local or national media and your existing customers and employees become aware.

For many small businesses, they have little option other than to pay a settlement to the disgruntled employee in exchange for a legally binding agreement to prevent any future claims.  Reason being, is that they are unlikely to win or the costs associated with defending the claim are just not commercially viable.  I liken this to driving a car without insurance.  In the short-term you might save a few hundred pounds by avoiding the expense and additional paperwork of introducing precautionary measures but the damage to your reputation and bank balance will be significant if you are caught without proper protection.

So, how can you provide value for money protection for your Company to minimise the risk of a costly dispute or tribunal claim?

1.       Contracts of employment

A good starting point is having properly documented employment contracts and an Employee Handbook.  This will provide a clear understanding of their rights, obligations and responsibilities and provides a basic set of rules in the workplace to minimise the risk of misunderstandings escalating into costly disputes.

2.       Employee Checks

The following simple checks will reduce the risks to your business:

  1. Take up employment references to confirm an employee’s work history
  2. Ask to see original copies of any relevant professional qualifications
  3. Establish they have the right to live and work in the UK by taking a copy of their passport or relevant visa and carrying out the necessary checks.   You risk a fine of £10,000 for employing an individual who has no right to work in the UK.

3.       Disciplinary Procedure

Having an up-to-date and legally compliant disciplinary procedure is only half the story and you will need to ensure that you are familiar with it and have confidence in operating it.

4.       Performance Management

Your business is only as good as your people and accepting poor performance in small and medium sized companies can have a significant impact on productivity and morale, so should not be ignored.

Having a Capability Procedure in place to manage performance issues will ensure that these are dealt with consistently and fairly.  Investing in a web-based appraisal system is a cost effective way to measure performance against clear goals which link directly to your business objectives.

5.       Always take advice before dismissing an employee

Employment law can be complex and can catch you out if you are not an expert.  For example, a common mistake made is to dismiss an employee instantly for gross misconduct when you still need to go through a prescribed process before dismissing.

Get expert advice early and consider using an external HR Consultant to support you as the cost of this can be far less than the expense of using a specialist employment solicitor or dealing with a tribunal if the situation escalates. A good HR Consultant will provide expert guidance through the process to minimise the risk of a claim being made, whilst being practical and commercially minded.

6.       Maintain employee records

Maintaining employee records in compliance with the Data Protection Act which includes all correspondence relating to employees terms and conditions of employment and notes relating to their performance or meetings relating to conduct, will ensure that you have documented evidence to draw upon in the event of a dispute and is of far greater value than drawing upon memory after the event.

7.       Get expert help before acting

Seek assistance from an experienced HR professional who can give advice on options and provide on-going support with regard to establishing procedures and systems to safeguard the Company against costly disputes.  Support can also be provided to resolve and provide solutions to any concerns that you have.  Unfortunately, acting after the event will expose you to high solicitor fees or a settlement agreement which will be far more expensive than the cost of using an HR Consultant in the first place.

It is inevitable that most employers will face a dispute at some point and may very well face an employment tribunal claim.  Observing the points made above will minimise your risk to claims for compensation and legal costs.  In addition, you will have introduced good employment practices for your employees which will not only act as a framework to support the growth and development of your business but will secure your reputation as an employer of choice.


By Bruce Ramshaw

Principal Consultant




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