How to avoid the hidden costs
Of course you know that if you unfairly dismiss an employee you’ll have to pay the price - compensation will be awarded against you. But is this all you’ll have to worry about? Are there any hidden costs too?
Compensation
The main types of compensation are the Basic Award, the current maximum being £8,700, and the Compensatory Award with a maximum of £58,400. Most employers believe this is all they have to worry about if they unfairly dismiss a member of staff. But this is far from being the case. The following example shows why.
Example
An employer called an employee into the office and sacked him on the spot, purportedly for “gross misconduct”. There was no discussion and certainly no formal disciplinary hearing. The employee sought advice from a solicitor who told him to write to his former employer to ask for written dismissal reasons. So he did this and received no response whatsoever. Off he went to tribunal. Between the dismissal and the hearing date the employer was far from co-operative and didn’t even bother turning up at the hearing.
Awarding. The tribunal found the dismissal to be unfair. It then considered the claimant’s schedule of loss. He was claiming approximately £7,700 but actually ended up with nearer £14,000. This came as quite a shock to the employer. How could this have happened?
How the totals add up
The employer made two big mistakes. Firstly, he totally ignored the request for written reasons for dismissal. This is a common mistake. An employee, with at least one year’s continuous service, on a permanent or fixed-term contract, is legally entitled to the reason for dismissal in writing and this should be provided within 14 days of the request. Even if you’ve already spelled out the reason for dismissal in the dismissal letter, you should send another letter repeating the reason (if requested). If you fail to do this, all the employee has to do is go to tribunal to have two weeks’ full pay awarded - this isn’t limited to the statutory amount, currently £290 per week.
Tip. Never ignore a request for written reasons for dismissal, even if you’ve already put them in the dismissal letter. It’s not the content of your reply that matters - merely the fact that you’ve replied at all.
Follow the procedure. The second, and by far the more serious mistake made by our employer was to completely ignore the statutory dismissal procedures. As you will know by now they took effect in October 2004 but even now, many employers are still failing to follow them. This can have serious financial consequences. Here, the dismissal was automatically unfair so the tribunal awarded the employee a minimum basic award of four weeks’ pay at the statutory maximum. The next step was to look at the procedure. Because there had been a complete failure by the employer to follow it, the law allowed the tribunal to increase the award by between 10% and 50%. On this occasion it chose a 50% uplift.
Finally, the employee asked for (and received) costs of more than £2,000. Tribunals are increasingly making such awards where one of the parties has behaved badly. So that’s how the employer ended up paying nearly £14,000.
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