Can your company afford to gamble £68,400?

The Employment Rights (Increased Limits) Order 2010 S1 2010/2926 increases the limits on certain Employment Tribunal awards and other compensation that is payable under the employment legislation with effect from 1st February 2011.

The main changes that employers need to be aware of are as follows:-

• The order increases the limit on a week’s pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal from £380 per week to £400 per week.

• The maximum compensatory award for unfair dismissal which is currently capped at £65,300 will rise to £68,400.

• The minimum basic award in cases where the dismissal is found to be unfair by virtue of health and safety reasons, employee representative, trade union or, for occupational pension trustee reasons will rise from £4,700 to £5,000.

The new rates will apply to events that occur on or after the 1st February 2011. In the case of unfair dismissal the new rates will apply where the effective date of dismissal falls on or after this date. The old rates will still apply to dismissals or events that took place before this date.

Damages for discrimination claims which are not subject to the statutory cap are not affected by the changes.

Employment Tribunal claims have increased by 56% since 2008/2009. The average award made for an unfair dismissal claim in 2009/2010 was £9,120 whereas the highest award was £234,549 in a case where the statutory cap did not apply. Employers that find themselves in the unfortunate position of having to defend a claim may also be exposed to legal costs in the region of £10,000 to £20,000.

In contrast discrimination claims the average award made in 2009/2010 was around £20,000 and £52,087 in the case of disability discrimination and the highest awards were between £48,000 for age discrimination and £729,347 for disability discrimination. In fact the last two discrimination claims that I conducted that were heard by the Employment Tribunal achieved awards in excess of £200,000. Employers should be aware that in addition to having the potential to being more valuable to the claimant that discrimination claims also tend to be more expensive to defend due to their complexities and as such the costs are often hard to predict.

In addition to the above further loses are likely to be incurred by the business due to the time that is lost by the businesses in responding to the claim and by their witnesses having to take time out of work to attend the hearing. Even where an employer succeeds in defending a claim they may still be unable to recover their costs because, except in exceptional cases Employment Tribunals are extremely reluctant to make an order for costs as many claimants are still unemployed. In fact out of 236,100 claims that were accepted by the Employment Tribunals only 412 cost orders were made and only 324 just 0.14% were for the Respondents.

Palmers Offer a Solution

To help local businesses minimise the potential for employment disputes and their consequences Palmers is offering PACS (Protection & Compliance Scheme) as a fully integrated compliance and employment dispute insurance product.

PACS is a fixed price service (payable monthly) which is intended to help businesses avoid employment disputes by ensuring that they are operating to the best standards of employment practice and procedures.

You may obtain further details of our services that are covered under the scheme and our prices by either completing our application form on line or by contacting a member of our employment team.