Do you need employment Tribunal Insurance?

Because employment law is probably not your area of expertise, it can appear complex and against you as the employer. Unfortunately, the bigger HR providers play on this fear of getting things wrong and that you could end up in costly employment tribunals. In many circumstances, getting into these sorts of situations, can be prevented by good HR advice and support, and nipping things in the bud early. Have a read of our blog to see why you don’t need Employment Tribunal Insurance.

Over the last 12 months, many of our new clients that we’ve spoken to when they have desperately needed our HR advice and support, have already been working with an outsourced HR provider. They have come to us because, and I quote “we just aren’t getting the right help and support to help us resolve the problem” or “they are sitting on the fence and what I need is someone who will just tell me the best way to deal with the problem we have”

When we have resolved their problem for them, I go onto ask, why they chose to work with the provider they did in the first place. Many of these busy SME owners choose to work with an outsourced HR provider because they offer Employment Tribunal Indemnity Insurance, which is often sold to them as an absolute necessity. This then feel makes them “safe” and “protected” against the potential financial risk of a costly Employment Tribunal Claim.

However, if you’ve ever had to make an insurance claim, you’ll know how painful it is! Many insurance providers try and wriggle their way out of paying out on any claim, as there is often something in the small print that hasn’t been explained or understood by you, and your claim is invalid. Well, let me tell you, Employment Tribunal insurance is no different!

What is Employment Tribunal Indemnity Insurance?

Because employment law is probably not your area of expertise, it can appear complex and against you as the employer. Unfortunately, the bigger HR providers play on this fear of getting things wrong and that you could end up in costly employment tribunals. In many circumstances, getting into these sorts of situations, can be prevented by good HR advice and support, and nipping things in the bud early.

Tribunal indemnity insurance ranges from full insurance against all legal and compensation costs arising from a tribunal claim, to just simply covering your legal costs or may pay out nothing at all because you didn’t follow their rules or follow their exact advice to the letter.

As with any insurance policy, the first step is to think about the risk you are insuring against. If you run an events business, you will want to insure yourself against a pandemic and government lockdowns, so that you don’t lose out on all the potential revenue you would have made when the events must be cancelled as they aren’t allowed to go ahead.

For many business owners, it’s not so easy to quantify the risk and potential costs of a tribunal claim, so they go for peace of mind, and work with the HR provider that offers this insurance, along with tying themselves into a 5 or 7 year contract with that HR provider that it is impossible to get out of, some of our clients know how difficult it is to get out of these contracts – they’ve tried and its nigh on impossible!

But the reality is that there are many steps that could be taken before you get to an employment tribunal, and an employer who has sensible HR policies and procedures in place, and follows them, and has good HR support, is actually highly unlikely to get to a tribunal in the first place!

Let’s look at the worst case scenario. If you get taken to a tribunal, and you lose, these are the latest figures available and relate to the Average awards paid out in 2019/2020. The median compensation payment for Unfair Dismissal claims in the same period was £10,812. These awards might be surprising because all you may have heard will be the hugely successful cases with the high awards that make the papers, but these cases are rare.

If the tribunal claim goes ahead, there will be legal costs, but much more significantly, there will be huge management time lost in the preparation and aftermath of a tribunal – these costs will not be covered by the insurance. The impact on employee motivation, employer reputation and even on management morale, which ultimately hits the bottom line of the business, doesn’t have a price, and therefore isn’t covered by the insurance.

Discrimination Area Average Award Paid £
Unfair Dismissal £10, 812
Race Discrimination £9,801
Sex £17,410
Disability £27,043
Age £38,794
Sexual Orientation £27, 936

So, to go back to the question at the beginning, do you need Employment Tribunal Insurance?

I would really ask you to think carefully about signing up to a 3, 5 or 7 year agreement with a provider, simply for peace of mind that you are protected against the risk of a claim and that the insurance will pay out – it may not.

You may then be stuck in a long contract with an outsourced HR provider that doesn’t know your business, understand your problems, and won’t give you clear and decisive advice.

Many of our retained clients are paying to work with us, on top of paying for a contract they can’t get out of, because we offer a bespoke service, where we get to know them and their business and will give them clear advice that helps them to manage day to day people issues or the more complex of cases.

If managers are not capable of handling an issue with performance on their own, or there is a persistent problem, such as bullying and harassment, then as HR experts, we can provide training, coaching and even hand holding to support them through these issues to a successful outcome.

If matters are so serious that the employee is likely to be able to make a claim at an employment tribunal, then we can help you to evaluate the risk of a successful claim and can mediate between you as the employer and the employee.  If that doesn’t work/or it’s too late for this approach, then we can help you to negotiate the terms of a settlement agreement, making a financial payment to the employee to leave the business and waive all their rights to making a claim against you. This is not desirable, and it does cost money, but it can resolve the situation quickly and allow you to get back to running the business and spending any more of your valuable time on the issue.

Summary

If you are looking at working with an outsourced HR provider, please don’t base your decision on fear. If anyone is selling you their services and using fear as their main incentive, you need to ask yourself why they are doing this.

Also take care that the outsourced HR provider you select doesn’t tie you into a long contract. Long contracts are designed to cover poor service. Most SME’s don’t have the time, the energy or the money to battle their way out of a contract they have signed into in a rush without understanding the potentially negative consequences.

A good HR provider will audit your people processes and practices when they start working with you, and then make clear practical proportionate recommendations to ensure you are legally compliant and have good HR practices in place. This may involve some training your managers. All of this will significantly reduce the risk of a successful claim against your business.

If you do have an employee dispute and are supported by an outsourced HR provider that doesn’t offer Tribunal Indemnity Insurance, they should walk you through what you need to do together and will be with you every step of the way.

At Meraki HR, we don’t offer Tribunal Indemnity Insurance. We don’t feel we need to.

In 21 years of being an HR professional, I have been to two employment tribunals for businesses I worked for, and both cases were won by those businesses based on the processes in place and the way the cases were managed by me.

We may not offer Employment Tribunal Insurance, but we do have Professional Indemnity Insurance, which means you can claim from us if we have been negligent in providing advice to you. In 7 years of operating as Meraki HR, we have never had a client claim against our Professional Indemnity Insurance, and we have never had an employee take out an Employment Tribunal Claim against one of our clients, which we are extremely proud of. We will continue to provide our clients with an exceptional level of service and commercially driven and pragmatic advice.

Want to talk to us about our retained HR support, HR Oxygen?  Then why not book a call with us here;