WHAT HAPPENS WHEN AN EMPLOYMENT TRIBUNAL AWARD IS MORE THAN A SMALL BUSINESS CAN AFFORD?
A substantial proportion of Employment Tribunal awards are never paid in full.
There is another side to that problem which receives rather less attention.
When an Employment Tribunal calculates compensation, the respondent's ability to pay is not generally part of the calculation. A £50,000 award is therefore £50,000 whether the employer is a multinational company or a business employing six people.
But the consequences can be very different.
The best comprehensive research we have on payment of Tribunal awards is surprisingly old. A 2013 Government study found that 35% of claimants received none of their award and a further 16% received only part of it. Importantly, insolvency or the employer ceasing to trade was the most commonly reported reason for complete non-payment.
We do not appear to have reliable contemporary statistics showing how often an Employment Tribunal award itself contributes to the failure of a business. But it plainly can be part of the financial pressure which takes an already vulnerable small business into insolvency.
And that produces an uncomfortable result.
The successful claimant may still not receive the award. The business owner may lose the business. Other employees, who had nothing whatsoever to do with the dispute, may lose their jobs and potentially some of their contractual entitlements.
The obvious answer is that small employers should comply with employment law in the first place. Of course they should. But employment law is becoming considerably more complicated, while micro-businesses are precisely those least likely to have specialist HR or employment law resources.
There is therefore a difficult policy question here.
Why should an employee's rights be worth less simply because they work for a small employer?
But equally, what is achieved if an award contributes to the destruction of the business, the claimant still doesn't get paid and other employees lose their jobs as well?