Employment tribunals could bankrupt most small businesses

Two thirds of SMEs in the north west believe that the cost of an employment tribunal could spell bankruptcy for their business, according to a recent survey by employment law and HR consultancy, tp people ltd.

With a further 76% admitting they are 'unable to keep up' with ever-changing employment legislation, more businesses than ever are placing themselves at risk.

For those businesses struggling with existing employment legislation, these findings come at a particularly fraught time. The number of workplace disputes ending up in court has increased by more than 25% since the beginning of 2006 and, with a further eight pieces of legislation set to be rolled out before the end of 2007, this figure looks set to rise even further.

tp people's survey also showed that a massive 81% of SMEs do not realise that they are at risk of facing expensive tribunals even before new employees are recruited. By refusing to consider job applicants without sufficient grounds, SMEs could result in a tribunal being brought against them.

A further 64% are unaware that expectant and new mothers are now entitled to go into work for 10 days during their maternity leave without losing their right to statutory maternity pay.

Richard Parkinson, partner and head of tp people ltd, commented: "This survey has highlighted an overriding inability amongst SMEs to understand and comply with ever-shifting legislation.

"The simple fact of the matter is that those businesses that believe they are keeping costs down by not establishing a dedicated HR department or seeking proper advice on employment law issues are risking their livelihoods on a daily basis.

"Should an employment claim go as far as a tribunal hearing, the potential payout could total as much as £100,000 - enough to put two-thirds of SMEs out of business."