Average Cost of Employment Tribunal to Employer

If a workplace dispute cannot be resolved, employers may be forced to defend a claim before the employment tribunal. The average cost of an employment tribunal varies widely, influenced by the complexity of the claim, the type of allegations, and whether the case settles early or proceeds to a full hearing. While legal fees and compensation awards are the most visible expenses, employers should also consider indirect costs, such as reputational damage and operational disruption.

By understanding how the tribunal process works, including the steps involved and potential outcomes, employers can assess the most cost-effective way of dealing with an unresolved dispute while managing the employment tribunal costs that come with litigation.

 

How much are employment tribunal costs?

 

Under current rules, employees do not have to pay a fee to file an employment tribunal claim, but they do risk being liable for their employer’s cost if they lose; although this is generally a rare occurrence, with costs typically only awarded in exceptional circumstances, such as when a claim is found to be vexatious, malicious, or otherwise unreasonable. Costs awards in employment tribunals are not automatic and are at the tribunal’s discretion. The majority of claimants do not have to pay the employer’s legal costs even if their claim is unsuccessful.

Employers are responsible for covering a number of costs when defending a tribunal claim. There is a wide range of workplace disputes that could result in a tribunal claim, such as claims for unlawful deduction of wages, unlawful discrimination, or unfair or wrongful dismissal. Since all cases are different, it is difficult to arrive at a typical or ballpark figure to defend an employment tribunal claim. Costs vary, depending on factors such as the nature and circumstances of the claim, the complexity of the case, the volume of documents, number of witnesses and the level of damages sought. Typically, the overall cost will be commensurate with the complexity, size and value of the case.

The costs associated with defending tribunal claims fall broadly into three categories:

 

Legal fees

 

In the vast majority of tribunal cases, employers will instruct a solicitor or barrister, or both, to help prepare and present their defence. Most tribunal claims can be complex, so employers will typically need suitable legal representation to stand any chance of successfully defending a claim. Except where the claimant has acted unreasonably, or their claim had no reasonable prospects of success, the employer will rarely recover their legal costs. In most cases, each party will bear their own costs, regardless of the outcome.

Solicitors’ fees for preparing a defence, drafting witness statements, and attending hearings can range anywhere from £5,000 to £20,000, depending on the complexity of the case. For more intricate claims, such as those involving discrimination or whistleblowing, costs can exceed £50,000. Choosing to settle early can help avoid escalating legal costs, although this depends on the merits of the claim.

 

Damages

 

If a claim is successful, the tribunal has the power to make a number of different orders, including an order for damages. This is a sum of money that the employer will be required to pay to compensate the claimant for any loss or harm suffered as a result of the employer’s wrongdoing. Tribunal awards can vary, depending on the claim, although compensation can often run into thousands of pounds, sometimes more. For example, for unfair dismissal, compensation consists of a basic award and a compensatory award. As of April 2024, the basic award is capped at £17,130, while the compensatory award is limited to £105,707 or 52 weeks’ gross pay, whichever is lower. However, in claims involving whistleblowing or health and safety dismissals, there is no cap on the compensatory award.

Claims for unlawful discrimination under the Equality Act 2010 can result in significantly higher awards as there is no statutory cap. Compensation typically includes financial losses and injury to feelings, with the latter being calculated using the Vento bands. The upper Vento band for serious cases of discrimination currently ranges from £29,600 to £49,300, with awards exceeding these figures in exceptional cases.

 

Time

 

When defending a tribunal claim, even where legally represented, the time involved in preparing any defence can be significant for an employer. This can include collating relevant documentation and liaising with legal advisors, as well as time taken out of the business for staff to give evidence at a hearing, or for a suitable representative of the business to be available to make decisions about the conduct of the defence. On average, tribunal hearings will last no more than 1-3 days, although in complex cases they can run into several weeks.

Additionally, the cost to the employer in defending a tribunal claim isn’t limited to legal fees, damages or time out of the business. The employer must also factor in the potential cost to their business reputation and employer brand. The press and public are usually allowed to attend tribunal hearings, and to listen to the evidence and outcome, where adverse publicity surrounding allegations or findings of employer wrongdoing can be extremely damaging.

 

Reputational and Business Costs

 

A tribunal claim, particularly one that becomes public, can harm an employer’s reputation, affecting relationships with existing employees, customers, and potential hires. Businesses may also face operational disruption as management and staff spend time preparing for the case, attending hearings, or providing evidence.

 

Settlement Agreements

 

Many employers choose to settle claims before they reach the tribunal stage to avoid uncertainty and minimise costs. Settlement agreements typically involve a payment to the claimant, which may range from £5,000 to £30,000, depending on the strength of the claim. While this avoids the risk of higher tribunal awards, it still represents a financial outlay and does not eliminate reputational risks.

 

What is the process to defend a tribunal claim?

 

However, even for small and straightforward claims, the cost of defending the claim will start adding up almost straight away and will continue to accrue throughout the course of the proceedings. This is because there are various important procedural steps involved in defending a tribunal claim that must be complied with before the case is heard by the tribunal.

The steps involved in defending a tribunal claim will typically involve:

 

Filing a defence

 

Once a claim has been lodged by the claimant using form ET1, the employer will be required to file a defence, using form ET3, within a period of just 28 days. This will need to set out the legal and factual basis upon which the claim is defended. If the employer fails to respond, or is late in filing a defence, default judgment can be entered automatically in the claimant’s favour. Employers can ask the tribunal for an extension of time in writing, although the tribunal will only grant an application where it’s fair to do so.

 

Dealing with case management orders

 

The employer will be required to disclose any documentation relevant to the case, even if it helps to support the claim. This can include evidence such as the contract of employment, pay slips, minutes of meetings, internal memos, and emails or correspondence. Both parties will also be ordered to exchange witness statements, providing a written account of any oral evidence to be relied upon. Employers must therefore carefully assess what evidence they will need to defend any claim, and ensure that this is exchanged within the prescribed time limits. The employer will also usually be responsible for preparing any document bundle to be used at a tribunal hearing.

 

Attending hearings

 

In complex cases there may be multiple hearings. These can be held in person, by telephone or via video conferencing. Where held in person, this will usually be at the tribunal office closest to where the claimant works, or previously worked. In some cases, a representative of the business need not attend, where the employer can instruct their solicitor or barrister to attend on their behalf. However, where witness evidence is required, typically at a final hearing, the employer will need to have their witnesses present, ideally with someone from their business to liaise with the witnesses and legal representative.

 

Do employers have to attend tribunal hearings?

 

Depending on the complexity of a tribunal claim, the employer can expect to attend a number of different hearings, or be required to instruct a legal representative to attend on their behalf. These can include preliminary, liability, remedy and appeal hearings:

 

Preliminary hearings

 

A judge will decide whether a claim requires a preliminary hearing having considered the ET1 and ET3. In many cases, the judge will issue standard case management directions, with time limits for compliance although, in complex claims, a preliminary hearing may be deemed necessary prior to any final hearing. This hearing will be used to set a timetable for exchange of statements and documentation. It can also be used to determine specific issues in the case, such as whether elements of the claim should be struck out, or if the claimant is disabled in the context of a discrimination claim. In some cases, it may even be necessary for witnesses to attend to give evidence.

 

Final hearings

 

If a claim cannot be resolved, the matter will proceed to a final hearing. Witnesses will be required to attend this hearing, either in person or remotely, unless their evidence is to be given in writing. The tribunal will hear oral evidence from both sides, providing each party with an opportunity to cross-examine any witness. The parties will also be given the chance to make oral submissions, although in complex cases the tribunal may request submissions in writing. The tribunal will go on to consider all the evidence and arguments before making a decision. The parties may be informed of the tribunal’s decision on the day, or this will be provided in writing a few days or weeks after the hearing.

 

Remedy hearings

 

If the claimant is successful, the tribunal can make a number of orders depending on the nature of the claim. Examples include ordering the employer to give the claimant their job back or pay them compensation. If complex, the issue of remedies may be adjourned to another hearing. Typically, a remedy hearing will be to discuss the amount of compensation to be paid to the claimant, where the parties will be given directions on how to prepare for the hearing and what additional documentation they will need to provide.

Appeal hearings: either party may ask the tribunal to reconsider its decision, for example, on the basis that a mistake was made in the way it reached its decision or there’s new evidence. An appeal can also be made to the Employment Appeal Tribunal if any party thinks the tribunal made an error in law. In either case, the employer may need to provide written representations and additional documentation. They may also need to attend a hearing, either remotely or in person, or instruct a solicitor or barrister to attend on their behalf.

 

How much is employment tribunal compensation?

 

The compensation that an employer can expect to pay will differ for every type of claim, as well as how much money the claimant has lost because of the employer’s actions. This may be money that the employer owes to the employee under the terms of their employment contract, for example, where the employer has wrongly deducted money from their wages or failed to provide them with the correct notice period on dismissal. It can also include an amount of money to compensate the claimant for being treated unfairly.

In claims for unfair dismissal, compensation is made up of a basic and compensatory award. A basic award is a fixed sum, calculated to a statutory formula using the claimant’s age, length of service and salary. A compensatory award is to compensate the claimant for money they’ve lost as a result of being dismissed, including loss of earnings and loss of statutory rights.

In unfair dismissal claims, when calculating the basic award, there is a prescribed cap on the employee’s weekly pay, plus a limit on the length of service. The maximum basic award for the year from April 2024 is limited to £17,130. The compensatory award, in the vast majority of unfair dismissal claims, is also subject to a statutory upper limit. This is currently set at 52 weeks’ gross pay or £105,707, whichever is the lower. However, in claims for unlawful discrimination, there is no such cap. The claimant can also claim for injury to feelings in discrimination cases. In the most serious cases, the upper bracket to compensate for the negative impact of discrimination on an employee’s emotional wellbeing is an additional £29,600 to £49,300.

 

Can employment tribunal costs be reduced or even avoided?

 

Even where an employer has a robust defence, the cost of successfully defending a claim can often far outweigh the cost of early settlement, especially where a claim is relatively low-value. Defence costs can quickly escalate, not least where a case is complex, or where the claimant is acting in person, often making the process even more frustrating and time-consuming. This means that settlement may be the most cost-effective option for an employer, notwithstanding the absence, or proof, of any wrongdoing on their part.

By securing expert legal advice at the earliest possible opportunity, employers can consider the best way to approach and, where appropriate, settle a claim. Employers should also be prepared to engage in the ACAS early conciliation procedure, where available, using this chance to explore any potential basis for settlement without the need for legal proceedings.

 

Need assistance?

 

DavidsonMorris’ employment law specialists work with employers to support with all types of workplace dispute resolution, from early conciliation stages through to litigation and providing representation and defending tribunal claims. For expert advice, contact us.

 

Average Cost of Employment Tribunal to Employer FAQs

 

Do employees have to pay to file an employment tribunal claim?

No, employees do not have to pay a fee to file a claim. Tribunal fees were abolished in 2017 following a Supreme Court ruling.

 

Can an employee be ordered to pay the employer’s costs?

It is rare, but employees may be ordered to pay the employer’s costs if their claim is deemed vexatious, malicious, or unreasonable by the tribunal.

 

What is the average cost of defending a tribunal claim for employers?

The cost varies widely but typically ranges from £5,000 to £20,000 in legal fees. For more complex claims, such as discrimination cases, costs can exceed £50,000.

 

What is the maximum compensation for unfair dismissal?

The maximum compensatory award for unfair dismissal is capped at 52 weeks’ gross pay or £105,707 (as of April 2024), whichever is lower. The basic award is capped at £17,130.

 

Is there a cap on compensation for discrimination claims?

No, compensation for discrimination claims is uncapped. Claimants can also receive injury to feelings awards, calculated using the Vento bands.

 

Can a claim be settled before reaching a tribunal?

Yes, many claims are settled through settlement agreements, often involving compensation payments to the claimant. Settlement amounts typically range from £5,000 to £30,000, depending on the case.

 

What are the indirect costs of a tribunal for employers?

Indirect costs include reputational damage, disruption to operations, and the time spent preparing for hearings and gathering evidence.

 

How can employers minimise the risk of tribunal claims?

Employers can reduce risks by implementing robust workplace policies, addressing grievances promptly, and providing training on employment laws and best practices.

 

Do tribunal awards include injury to feelings?

Yes, in discrimination cases, claimants can receive injury to feelings awards to compensate for emotional distress caused by unlawful treatment.

 

Can small businesses afford to defend a tribunal claim?

Defending a tribunal claim can be financially burdensome for small businesses. Early resolution through settlement or mediation is often a cost-effective alternative.

 

Glossary

 

Term	Definition
Employment Tribunal	A judicial body in the UK that resolves disputes between employers and employees, such as unfair dismissal or discrimination claims.
Compensation Award	The financial sum awarded to a claimant by the tribunal, which may include payments for financial losses and emotional distress.
Basic Award	A fixed sum paid to claimants in unfair dismissal cases, calculated using age, length of service, and capped weekly pay.
Compensatory Award	A payment awarded to cover financial losses resulting from dismissal, such as lost earnings, subject to statutory caps in most cases.
Vento Bands	Guidelines used to calculate injury to feelings awards in discrimination cases, with three bands reflecting the severity of harm.
Settlement Agreement	A legally binding agreement between an employer and employee to resolve a dispute without proceeding to a tribunal, often involving compensation.
Whistleblowing	The act of reporting wrongdoing or illegal activities within an organisation, which is protected under employment law.
Injury to Feelings	Compensation awarded in discrimination cases to address the emotional impact of unlawful treatment on the claimant.
Legal Costs	The fees incurred for solicitors or barristers representing a party in tribunal proceedings.
Operational Disruption	The impact on a business’s operations caused by preparing for and attending tribunal hearings.