An introduction to employment tribunals for SMEs

The phrase ‘employment tribunal’ is enough to give most SME owners and managers the chills. Although it might feel better to bury your head in the sand, it’s important to understand the basics and know what your rights and obligations are should you be taken to an employment tribunal.

What are employment tribunals?

When and why were employment tribunals established?

How many employment tribunals take place in the UK?

How do employment tribunals work?

Are employment tribunals kept on the public record?

How do employment tribunals calculate compensation?

How many employment tribunals hearings are successful?

What is the best way to deal with employment tribunals?

The importance of accurate record-keeping

What is an employment tribunal?

An employment tribunal is a public body in England, Wales and Scotland independent of the government. Employment tribunals exist to hear and resolve disputes between employers and employees over employment rights. The most common disputes involve unfair dismissal, breach of contract, discrimination and redundancy payments.

In Northern Ireland, the set-up is slightly different. Industrial tribunals deal with the same topics as employment tribunals in the rest of the UK, while fair employment tribunals deal specifically with discrimination based on political opinion or religious belief.

When & why were employment tribunals established?

Employment tribunals were first introduced 1964 as a way of dealing with employment disputes quickly, informally and inexpensively. They were originally called ‘industrial tribunals’ and were associated with the Industrial Training Act 1964 but were renamed as Employment Tribunals in August 1998, under the Employment Tribunals Act 1996.

Since their introduction, employment tribunals have become increasingly complex and formal. For instance, an employee or employer could once reasonably represent themselves at an employment tribunal. Nowadays, the technicalities involved mean in most cases only specialist employment lawyers can realistically represent the parties involved.

How many employment tribunals take place in the UK?

In the year ending March 2021, the UK saw 117,926 employment tribunals. In contrast there were 103,973 during 2019/2020 and 117,926 during 2018/2019.

The number of cases being brought to employment tribunal in the UK rose sharply after 2017 when the fees associated with requesting an employment tribunal were scrapped. Claimants now need pay only for their costs, not the fees of the tribunals and this has understandably increased the number of claims and self-represented cases because employees no longer have to weigh up the cost benefit of taking their employer to a tribunal.

How do employment tribunals work?

It’s important to remember that employment tribunals are a last resort, to be used after an employee and employer have tried to resolve a dispute informally or formally. They are expensive, time-consuming and difficult for everyone involved. That’s why alternative methods of dealing with disputes are always recommended.

If you and an employee are unable to resolve a dispute through your grievance procedure, the employee has the right to request their case is heard by an employment tribunal. To do this, the employee must contact ACAS within 3 months less 1 day since the date of the event in question. This is known as the 'limitation date'.

ACAS will offer the option of ‘early conciliation’ to give the claimant and employer the opportunity of coming to an agreement without going to tribunal.

If the claim is exempt from early conciliation, the early conciliation is unsuccessful, or the claimant chooses not to take this option, ACAS will issue an early conciliation certificate. The employee then has one month to make a claim to the employment tribunal.

The employer will be notified that they are being taken to a tribunal by post and will receive a Form ET1 which is the form the employee completed to make their claim.

The employer must then complete an official response – the ET3 – and submit it within 28 days.

Once all paperwork has been completed and a date has been confirmed, the employee, employer and their representatives are invited to attend the employment tribunal. The tribunal may be a panel of members or may be the judge alone. During the hearing, the employer, employee and any witnesses give evidence and answer questions from the other side’s representative and the judge.

At the end of the meeting, the tribunal announces the judgement. If the employee wins, the tribunal will detail how the employer should compensate the employee and under what deadline. If the employee loses, there is a 14-day window for the tribunal to be asked to reconsider. The employee can appeal if they are still unhappy with the result.

Employers also have the right to appeal if they believe the decision is unfair.

Are employment tribunals kept on the public record?

Most employment tribunals are open to the public. Anyone – members of the public or the press – can attend. As a result, employment tribunals tend to be kept on the public record. The tribunal will only exclude a judgement from public records in very exceptional circumstances. The best way to prevent employment tribunal judgements being made publicly available is to prevent an employment tribunal in the first place – such as through an out of court settlement.

Employment tribunal compensation

The amount of compensation that an employee is entitled to depends on the type of claim they are making.

Unfair dismissal compensation follows a set formula which takes a range of factors into account. It is divided into two parts:

1. A basic award. This is a fixed sum, calculated using an agreed formula.
2. A compensatory award. This compensates the employee for the money they lost as a result of losing their job.

As of April 2021, the cap on unfair dismissal claims is £89,493 or 52 weeks’ gross pay, whichever is lower.

Awards for breach of contract are limited to £25,000 for each incident. In comparison, discrimination claims can be more costly for employers with no limit on the compensation that can be awarded.

How many employment tribunals hearings are successful?

It’s important for employers to recognise that employment tribunals overwhelmingly favour employees. As an example, in 2019 a total of 9,383 were heard before an employment tribunal. Of these, 8,445 (90%) were won by the employee with only 938 (10%) won by the employer.

This sharp contrast shows the importance of working with employees to prevent problems developing to the extent where an employee feels that an employment tribunal is their only option.

What is the best way to deal with employment tribunals?

The best way to deal with employment tribunals is to prevent them happening in the first place. Developing clear policies and processes that employees and managers understand is essential as is ensuring a strong culture that supports trust, transparency and fairness. With these in place, you and your employees can work through any differences respectfully for an outcome that’s positive for all parties.

Breathe are partnered with more than 500 professional HR consultants, many of whom have expertise in employment tribunals and employment law. Breathe's HR Partner Directory can be searched by area and is a great resource if you are looking for professional HR assistance.  

The importance of accurate record-keeping

If one of your employees raises a grievance which could potentially lead to an employment tribunal, it’s essential that you maintain a full ‘audit-trail’ of all steps and actions, including communications with the complainant. As we have already discussed, tribunals overwhelmingly favour employees and judges scrutinise employers, looking for evidence that employers have followed correct procedures and employment law.

Using a system like Breathe to record details of the grievance, the minutes and outcomes of conversations and meetings with the complainant, in addition to any documents related to the case can help you demonstrate what you have done to address the issue. Having this information secured securely in a single system in a format which can very easily be shared with tribunals can go a long way towards supporting your defence.

Although an employer may have followed the letter of the law in terms of managing a grievance, they need to be able to prove this to a tribunal judge. If information is missing or difficult to find, collate and supply to a judge, they are not likely to view this with any sympathy for an employer. Breathe’s dedicated document management functionality makes it easy to store information within one single, central repository from where it can be accessed and retrieved in minutes.