You have an employment tribunal claim that you believe your organisation should settle. There may be plenty of obstacles ahead of you, in the shape of your MD muttering phrases such as ‘it’s a matter of principle’, or your FD has taken a particular dislike to the claimant and you receive an ‘over my dead body’ type response. Sound familiar?

There may also be less emotionally charged obstacles, such as a genuine fear of starting a claims culture within the organisation. In reality, if the employment tribunal claim that you are dealing with is likely to lead to liability and cause embarrassment, refusing to settle is only kicking the can down the road.

So, as a HR professional, what can you do? We’ve put together a quick formula which helps build the business case for settling. Using it will go a long way towards getting the budget to settle a claim that you just need to see the back of.

The Merits of the Case – A Quick Formula

Apply a sensible number to what the claimant will win if they win all of their arguments. Average injury to feelings awards can range from a lower band of £990 to £9,900 for less serious cases, to an upper band of £29,600 to £49,300.

Then, talk to your employment lawyers and take a sensible percentage view of your chances of success. If your lawyer won’t give you a straightforward percentage – change your lawyer and then ask your new lawyer.

If your liability is £15,000 and you have a 25% chance of success, you can use a figure of £11,250. An artificial number but it makes sense. Next up is everyone’s favourite – legal fees.

Legal Fees

Many quality legal providers now offer fixed rate cards for Employment Tribunal litigation. Others still charge exorbitant hourly rates. To give you a good sense of what a claim may cost your organisation; a one-day unfair dismissal claim should be in the region of £7-8k. If you are dealing with a two-day discrimination claim, it’s more likely you’re looking at a cost of £10-15k. If your employment lawyers are charging you a lot more than this – change them.

It’s helpful to have a clear sense of what the legal costs will be from this moment, right to the end of the tribunal proceedings (don’t consider any costs already incurred as you are dealing with a situation as of today, not as from the beginning). For arguments sake, if you are one week away from a one-day unfair dismissal claim, £2,000 of costs are still likely to be incurred.

Company Costs

Company costs in an employment tribunal claim are twofold. Firstly, they include the actual costs of your employees being in the tribunal and secondly, the opportunity cost for them not doing the other parts of their role.

In terms of ‘actual costs’ it would be fair to assume that a one-day tribunal hearing would take a manager (who is a witness) out of the organisation for one week. This takes in to account; preparing for the employment tribunal, the inevitable distraction that comes with being involved in an employment tribunal claim and their attendance at the hearing. Add this to the company costs.

The opportunity cost is more difficult and depends on how much you like the person you are trying to get out of the tribunal! Those that have tangible business metrics can be easily distilled (and should be). Insert working figures for both and add them to the list, let’s say £3,000 in this example.

Finally, intangible company detriment.

To fight and lose is at a cost broader than the money you ultimately pay as a successful litigant. Everyone sees it and it will be talked about forever. Employer branding, recruitment, retention and ER are all questions that can be raised. It’s clearly intangible, but nevertheless we have to put a figure to it. So, let’s say 25% of the value of the claim.

How to use this formula

We started this blog with your grumpy MD or FD (or insert job title here) being unwilling to pay a settlement claim. Now, armed with this formula we hope you can approach this difficult conversation with confidence, clarity and a business case, i.e. if you are not paying X to settle, it will cost you Y. Any penny above that level should be justified, for example supporting line managers as a learning opportunity to ‘send out a clear message’ or any of a number of things. By and large, any deal under that amount is probably good business.

This approach provides HR professionals with a clinical, business reason to settle an employment tribunal claim, and does a great job in taking the politics and personal feeling out of the situation.

The tribunal process can be complex and no two cases are identical – check out our employment tribunal checklist for the other stages of the process.