Are employment tribunals worth £1,200?

Nigel Williams, 1 August 2013

It now costs £1,200 for a dissatisfied employee or former employee to take a non-trivial case to an employment tribunal hearing. Frances O’Grady, TUC General Secretary, described it as ‘making it easier for employers to get away with the most appalling behaviour.’ Unite have challenged the rule-change to a judicial review in October and promised to pay their members’ fees.

There is a market-based alternative. In a fluid, functioning labour market, the worse employers will have to pay more to attract the same quality of staff or risk not being able to recruit at all. Insecure employment demands higher pay than secure. Prejudiced employers deny themselves the widest choice of the best staff. If the change to employment tribunal rules can improve the labour market, it will benefit the employees too.

The United Kingdom has almost 5 million businesses. Most employ no-one beside the owners or partners, not counting self-employed, agency or contract staff. Book-keeping, business rates, VAT returns and the need to sell their own products and services have not put the owners off running a business, but they still stop short of employing anyone else.

Taking figures from the BIS Small Business Survey in 2012, there were 3½ businesses employing no-one else for every micro-employer with under ten on the payroll. There is a wide disparity between sectors. Only the accommodation and food sector has more businesses with employees than without. At the other extreme, there are 17 non-employing education businesses for every micro-employer in that sector. Businesses in arts and entertainment, transport and storage and health and social care are unlikely to employ, whereas over a third of businesses in wholesale and retail, manufacturing, finance and real estate and agriculture and mining have at least one employee. Manufacturing enjoys the highest proportion of more substantial employment. 2½ % of manufacturing businesses employ 50 people or more.

If employment tribunals without fees have been putting people off employing others, then these figures will start to improve. In each sector, businesses will change from the category of having no employees to those of micro-employers or bigger. If the number of UK businesses with employees grows above its current figure of 1.24 million, which is 74 percent of the total, then in that respect the policy of charging tribunal fees may be judged a success.