As 2022 draws to a close, the cost-of-living crisis and the fact that the UK is now staring down the barrel of a recession means that many businesses will be likely to have to make redundancies in the coming year.
Whilst we haven’t seen the number of redundancies one might have expected to see over the last few months, this may be due to the political uncertainty during the autumn having left employers stalling on making difficult decisions. Widely reported labour shortages or at least the perception of such, are likely to further complicate strategic decisions, with employers keen to find cost savings but simultaneously worrying that they may find it difficult to replace workers, when the economic climate eventually improves.
And of course, no one really wants to be considering laying off staff just before Christmas. Indeed, many retail and hospitality sectors will be hoping for a boost from a busy festive season to see them through what may be a difficult time ahead.
It is likely that many businesses will have no choice but to consider cutting costs in the New Year, in order to survive. For many sectors, efficiency drives will inevitably involve a review of the workforce and the potential of redundancies. With the political situation now stabilising and the UK expected to be in recession, along with the inevitable downturn which January brings for most businesses (skiwear outlets and gyms excepted), it is likely that the New Year will mean that some employers have to reluctantly let a number of staff members go.
My experience of the 2008 financial crisis was that shortly after dismissals started to bite, Tribunal claims soon followed. Indeed, there was something of an avalanche of employment litigation at that time. The Employment Tribunal waiting rooms became extremely busy. I would be surprised if we don’t end up in a similar position moving into 2023 / 2024. Busier Tribunals tend to mean that there are delays in cases being heard and this comes on top of the existing backlog of cases exacerbated by the Covid Pandemic.
Employees tend to be more likely to take matters to the Tribunal when they are less able to find replacement work. This is because walking into another job quickly, significantly reduces the level compensation and employees are less likely to bring claims if they can immediately replace their income elsewhere. If job vacancies reduce as looks likely, then we are likely to see a significant rise in Tribunal claims.
Employers should be aware that besides unfair dismissal and redundancy claims, employees may also bring other claims including those of discrimination and whistleblowing, as well as breach of contract, unlawful deductions, minimum wage and equal pay etc.
Employers need to be aware that:
- Awards for Unfair Dismissal are in most cases limited to a Basic Award akin to a statutory redundancy payment which depends on service and age, plus compensation for any loss of earnings up to a maximum of a year’s salary for the employee provided that they can show that they have done what they reasonably can to find replacement employment. A year’s salary is capped. At the time of writing (December 2022) the maximum compensation for a year’s salary is £93,878 but this figure is increased in April every year.
- The compensation for some unfair dismissal claims is not capped, for example where the reason for the employee’s dismissal was found to be one of having raised a health and safety issue or having made a protected disclosure (whistleblowing).
- Awards in discrimination cases are not capped either. These awards usually include an Injury to Feelings award, which depends on the severity and impact of the discrimination, along with an award for any loss of earnings, provided that the employee has done what they reasonably can to find another job. There is no limit on compensation for loss of earnings in discrimination cases.
- In Employment Tribunal claims, each party pays their own legal costs regardless of the outcome, i.e. whether they win or lose the case. Whilst occasionally, an Employment Tribunal will make a costs award in favour of one party to be paid by the other, this is only in exceptional circumstances where for example the other party has acted vexatiously or abusively or where their case is misconceived etc. As such, employers will usually pay their own costs, even where they are found not to have done anything unlawful.
- The cost of legal representation in an Employment Tribunal claim can be significant, not to mention the management time which such cases often require. Employment Tribunals also have the potential to have a negative impact on staff morale. A public hearing or Judgment carries with it the risk of bad publicity. As such, it is best to avoid claims wherever possible.
Employers are advised to:
- Take legal advice at an early stage.
- Ensure that a fair procedure is followed, both in line with employment law and the company’s own policies.
- Consider whether it may be appropriate to offer a Settlement Agreement (previously referred to as a compromise agreement) when letting an employee go.
- Ensure that any issues raised at the consultation stage or as a grievance are addressed in a thorough and timely fashion, with the benefit of legal advice.
If you do end up having to defend an Employment Tribunal claim, then we are here to advise and assist. We will always look to provide pragmatic and commercial advice. We will fight your corner and present your case aiming to secure the best outcome possible for your company.