Many small businesses are unaware that former members of staff can claim as much as £50,000 through employment tribunal proceedings.
An e-mail survey by the Forum of Private Business (FPB) found four out of ten small business owners are failing to protect themselves against such compensation claims. The research revealed that less than two thirds of small businesses have a formal procedure in place for dealing with staff complaints.
Jim Redman, Head of Research at the FPB, explained that there have been cases brought to employment tribunals as a result of a considerable amount of misunderstanding on both the sides of the employer and the employee. Sometimes “the employer was unaware even of what was going on.”
Redman said that sorting out grievances was usually “informal, especially in micro businesses”. But he urged that if things go wrong, “SMEs need a well-defined process. Everyone needs to be clear on what they can do.”
Redman continued: “In a sense it is simply formalising what is already in place informally in a lot of small businesses. Many small businesses recruit their employees from friends of friends, for example, and don’t see the need to set up a formal process. It can be seen to destroy trust.”
Nevertheless, Redman pointed out, “Compensation claims have been raised from £12,000 to a maximum of £50,000 – a lot of money for any small business. [A single claim] could even result in a company going out of business.
“When things do go wrong, it is a very, very vulnerable situation for a small firms employer. Employers don’t have to have anything very complicated. Just something on how to keep out of employment tribunals! ”
Redman commented that if a small business gets the process right from the start, then there shouldn’t be extra red tape to deal with later on. “It’s all part of the process of employing someone.”
Employers who would like guidelines on setting up dispute resolution procedures, could obtain a copy of the FPB’s Employer Manual produced in association with the TUC.
Advice and practical assistance is available on employment relations issues, including finding a way of settling disputes when things go wrong, from the Advisory, Conciliation and Arbitration Service (ACAS). Visit www.acas.org.uk to find out the details of your nearest enquiry point.
With thanks to Lloyds TSB Success4Business.
