If an Employment Tribunal determines that an employee has been unfairly dismissed, fines can be imposed on the employer.
These fines, also known as compensation awards, are intended to compensate the employee for their unfair dismissal and can vary depending on factors such as the employee’s age, length of service, and financial loss suffered.
However, if an employer is unable to afford the claim, it can cause financial strain and potentially impact the viability of the business.
It is important for employers to be aware of their legal obligations and take steps to ensure that employees are dismissed fairly and in accordance with the law to avoid such fines.
What are unfair dismissal fines?
Unfair dismissal fines are financial penalties that can be imposed on employers in the United Kingdom (UK) by an Employment Tribunal if it is determined that an employee has been dismissed unlawfully. Compensation awarded for unfair dismissal typically consists of two main elements.
- The first element is the basic award, which is calculated based on the employee’s age, length of service, and the statutory cap in place at the time of dismissal.
- The second element is the compensatory award, which is intended to compensate the employee for their financial loss resulting from the dismissal, such as lost wages, benefits, and future earnings.
The compensatory award does not have a statutory cap and is calculated based on the employee’s actual financial loss, subject to certain limits for procedural failures by the employee or conduct issues.
The amount of unfair dismissal fines can vary depending on various factors, including the circumstances of the dismissal, the length of the employee’s service, and the financial impact on the employee.
It is worth noting that the fines can be substantial, especially in cases where the dismissal is found to be particularly unfair or discriminatory.
Employers should be aware of their obligations under UK employment law and take steps to ensure that employees are dismissed fairly and in compliance with the law to avoid the potential financial burden of unfair dismissal fines.
What happens if my company cant afford to pay fines
If an employer is unable to afford the fines imposed for unfair dismissal by an Employment Tribunal in the UK, their former employee has the option to apply to their local county court or the High Court for bailiffs to collect the debt. The bailiffs may seize assets, such as equipment or property, to satisfy the debt.
Additionally, the employee may also submit a Penalty Enforcement Notice to the Department for Business, Energy and Industrial Strategy (BEIS).
Once the BEIS receives the Penalty Enforcement Notice, they will send a warning notice to the employer, providing them with 28 days to pay the outstanding fine. If the demand remains unpaid after the 28-day period, the employer may face further penalties of up to 50% of the original fine.
In less complicated situations, the Employment Tribunal’s decision will typically include an award for the claimant. Very always, this award stipulates the deadline by which the remedy must be paid to the claimant. The Claimant must take action to enforce the award if the Respondent does not pay this amount by the deadline.
In the past, the creditor of the judgement had to request an order from the County Court in order to have it enforced. This is no longer the case, though.
Successful underpaid Claimants may now seek right away for any of the following methods of enforcement as of April 1, 2009:
- Execution warrant
- Order for Attachment of Earnings
- order for third-party debt
- charging schedule
- Submission to the ACAS Quick Track
- appointment of a receiver by the court to collect any outstanding debts
The first four forms of enforcement are typically employed to collect debts.
Naming Scheme for unpaid Employment Tribunal awards
The ‘naming scheme’ was introduced on 18th December 2018 as a result of the Taylor Review of Modern Working Practices in the UK. If an Employment Tribunal judgment against an employer was made on or after this date and involves compensation of £200 or more, the employer could be considered for inclusion and naming under the scheme.
Employers who fail to pay the compensation awarded by the Employment Tribunal may be publicly named via a press release from the Department of Business, Energy and Industrial Strategy. The employer would receive a letter notifying them that their business will be included in the next release, exposing their non-compliance with employment law and potentially resulting in reputational consequences for their brand and business relationships.
It serves as a reminder to employers of the importance of fulfilling their legal obligations to pay awarded compensation to employees and underscores the consequences of non-compliance.
What if I cant pay the tribunal award against my company?
If you are unable to pay the tribunal award against your company, it is important to take appropriate steps to address the situation. You may consider negotiating a repayment plan with the employee or seeking legal advice on possible options, such as applying for a stay of execution or installment orders.
Ignoring or failing to pay the tribunal award can result in further penalties, such as additional fines, interest, or enforcement actions, including the possibility of the Department for Business, Energy and Industrial Strategy (BEIS) publicly naming your company as part of the ‘naming scheme’ for unpaid tribunal awards, which can have reputational consequences.
It is crucial to prioritise fulfilling your legal obligations and taking proactive measures to address any difficulties in paying the tribunal award in order to mitigate potential consequences and ensure compliance with employment law.
Raise finance
As a business owner, if you are faced with a tribunal award that you are unable to pay, one option you may consider is raising finance to fulfill your legal obligation. This could involve exploring various avenues for obtaining funds, such as obtaining a loan from a bank or financial institution, seeking investment from external sources, or utilizing personal savings or assets.
It is important to carefully consider the financial implications and feasibility of each option, including the interest rates, repayment terms, and potential impact on your business’s cash flow and profitability.
Request time to pay
If your business has been ordered by an Employment Tribunal to pay an award that you are unable to pay in full, you may request time to pay the award in installments. This can involve contacting the employee’s representative or the Employment Tribunal directly to negotiate a repayment plan based on your financial circumstances.
It is important to provide credible and reasonable proposals for installment payments, including the amount and frequency of payments, and to demonstrate a genuine commitment to fulfilling your obligation to pay the award. The Employment Tribunal may consider your request and may agree to a repayment plan that allows you to pay the award in manageable installments, taking into account your financial situation.
It is crucial to adhere to the agreed-upon installment plan to avoid further penalties or enforcement actions and to maintain compliance with the tribunal’s decision.
Seek insolvency advice
If your business is unable to pay a tribunal award that has been made against it, it may be an indication that your business is facing financial challenges and may no longer be viable. In such situations, seeking insolvency advice from qualified professionals, such as insolvency practitioners or business advisors, may be a necessary step.
Insolvency advisors can assess your business’s financial situation and provide guidance on available options, such as restructuring, refinancing, or entering into a formal insolvency process, such as administration or liquidation. Seeking insolvency advice can help you understand the legal and financial implications of the tribunal award and explore potential solutions to address the situation in the best interest of your business, employees, and stakeholders.
It is important to act promptly and proactively to address financial challenges and seek appropriate advice to navigate the complexities of insolvency law and protect the interests of your business.
Conclusion
In conclusion, if you find yourself in a situation where your business cannot afford to pay a tribunal award, it is imperative to take prompt and proactive steps to address the issue. Ignoring or failing to fulfil the tribunal award can have serious consequences, including fines, enforcement actions, and repetitional damage.
Seek early professional advice from financial advisors, legal experts, or insolvency practitioners, explore financing options, negotiate repayment plans, and take necessary measures to comply with employment law and fulfil your legal obligations.
By taking decisive actions and prioritising financial responsibilities, you can protect the interests of your business, employees, and stakeholders.
Don’t delay, take action now to effectively address the situation and navigate the complexities of employment law and insolvency to safeguard the future of your business.
Contact us today via our online enquiry form.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.