High rates of non-payment of compensation by employers shows how damaging the Coalition’s reforms will be to workers

07 November 2013

By David Renton, Garden Court Chambers

The publication of research showing a significant proportion of employers do not pay the compensation they owe to successful claimants at employment tribunal shows the promise that workers’ fees for justice will be reimbursed if they win their case means nothing. What we need to see the government now is action to readdress the balance.

Recently, published research from the Department of Business, Innovation and Skills shows that 49% of Tribunal awards are paid in full, and 16% in part, while 35% are not paid at all. In the five years since BIS last undertook a similar study, there has been no significant change in the number of Claimants reporting zero payment.

The factors which make non-payment more likely are revealing: enforcement rates are lower in claims brought by new or unrepresented employees, and against small employers. These are in effect the excuses that employers tell themselves: “I don’t have to pay because I’m a small business”, or, “I don’t have to pay because the worker had only been with me a few months”.

Low enforcement rates are a significant obstacle to fairness; if someone has been underpaid £500 by their employer, or if an Employment Tribunal has found that they were unfairly dismissed and made an order in their favour with a value of £4,000 or £5,000, and they receive nothing, they have not obtained justice.

One of the least attractive features of the present Tribunal system is that relatively small instances of unreasonable behaviour by workers can result in a significant diminution of their awards, whereas on receipt of a Tribunal judgment setting out the employer’s debt to their employee and their duty to pay, only a minority of employers settle their debt promptly and in full.

Several of the Coalition’s recent changes to employment law are predicated on the assumption that employers always pay their debts in full. For example, a partial justification for the introduction of Tribunal hearing and issuing fees was that there would also be rules enabling workers to claim back the fees associated with proceedings from their employer in the event that their claims succeeded. The proposals were predicated on the employer’s willingness to pay. Once it is seen that around a third to half will not pay, then the injustice of fees becomes even clearer.

From the fact that only a minority of employers do pay awards now, we can reasonably infer that payment rates will not increase when rogue employers are invited to pay not merely the amounts set out in a judgment, but the fees as well. In effect, the Coalition has been encouraging some Claimants to waste thousands of pounds obtaining mere paper orders, which employers will never honour.

A press release from BIS states that the government is considering deposit orders against employers, penalty notices for late payment and naming and shaming employers who fail to pay.

None of these proposals has been opened to public consultation; all of them are long overdue. And there are other simple, measures that could be taken; for example, changing the form of Tribunal Orders, or the content of the letters that accompany them, to make it clear that on the receipt of the Order the employer is obliged, immediately, to pay.

The Coalition has been in power for over three years and has been reminded repeatedly of the problems of non-enforcement.

As ever, action (if any is ever taken) will speak louder than words.

David Renton is co-author of Justice deferred: a critical guide to the government’s employment tribunal reforms – an accessible guide to your rights just £10!