New rules put small firms at risk

ALMOST 40% of small businesses are leaving themselves open to crippling lawsuits by not revising their employment policies, according to new research carried out by the Federation of Small Businesses (FSB).

Changes in employment laws came into force earlier this month. They aim to cut the number of cases that reach the Employment Tribunal.

Employers will now have to follow a rigorous three-step-procedure for all dismissal, disciplinary action and grievances in the workplace. Instead of the usual verbal warning, grievances must be set out in writing first.

Under the new laws, if a company loses a claim of unfair dismissal at the Tribunal, and cannot prove it followed the new procedure, the amount of damages awarded to the employee can also increase by up to 50%.

Even if the employer wins the case, nine time out of ten will not be able to recover legal costs, according to Murray Fairclough of Abbey Protection, which provides legal advice to FSB members.

He estimates the average cost at £2,000-£2,500. With the maximum payout now set at £55,000, the financial risks to small businesses are considerable.

David Bishop of the FSB is extremely concerned about the lack of awareness.

'This is the most significant change in employment regulation in the last decade' he said. Businesses need to get on top of these regulations because, 'these issues affect small businesses on average once every few months'.

Fairclough points out that companies are also at risk from unscrupulous employees who take advantage of unprepared bosses.

The three-step-procedure requirement does not apply to employees, and it there is no cost to individual in making a claim.

His warning to employers is clear: 'When it comes to small businesses, cash flows can be very limited' he said. 'You don‘t need to roll out big numbers before they are in serious trouble.'

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in