Employment Tribunal Costs: What Employers Need to Know

Employment tribunal claims cost money to defend regardless of outcome. Understanding the costs helps you make informed decisions about settlement.

Types of Costs

Legal Fees

Your own legal representation:

• Solicitor preparation
• Barrister for hearings
• Correspondence and advice
• Document review
• Witness statement drafting

Management Time

Internal costs:

• Gathering documents
• Preparing witness statements
• Attending hearings
• Instructing lawyers
• Internal meetings

Compensation Awards

If you lose:

• Basic award
• Compensatory award
• Injury to feelings (discrimination)
• Aggravated damages (in some cases)

Typical Legal Costs

Solicitor Fees

Stage	Typical Range
Initial advice	£500-1,500
ACAS early conciliation	£500-1,500
Response to claim	£1,500-3,000
Disclosure/preparation	£2,000-5,000
Witness statements	£2,000-4,000
Final hearing prep	£2,000-5,000

Barrister Fees

Hearing Length	Typical Fee
1 day	£1,500-3,000
2-3 days	£3,000-7,000
Week	£7,000-15,000+

Total Costs

Claim Type	Typical Total
Simple unfair dismissal	£5,000-15,000
Complex unfair dismissal	£15,000-30,000
Discrimination claim	£15,000-50,000+
Multiple claims/claimants	£30,000-100,000+

Compensation Awards

Unfair Dismissal

Basic award:

• 0.5-1.5 weeks' pay per year of service
• Maximum weekly pay: £700 (2024/25)
• Maximum basic award: £21,000

Compensatory award:

• Actual financial loss
• Maximum: £115,115 or 52 weeks' pay (whichever lower)
• Can be reduced for contribution/mitigation

Discrimination

No cap on compensation:

• Financial loss
• Injury to feelings
• Personal injury (in some cases)
• Aggravated damages

Injury to feelings (Vento bands):

• Lower: £1,200-11,700
• Middle: £11,700-35,200
• Upper: £35,200-58,700
• Exceptional: Above £58,700

Whistleblowing

No cap:

• Basic award (minimum applies)
• Compensatory award (uncapped)
• Often substantial

Average Awards

Reality check - median awards are lower:

• Unfair dismissal: Around £13,000 median
• Discrimination: Wide range, median varies by type
• Most cases settle for less than maximum

When Costs Can Be Awarded

General Rule

Each side bears their own costs.

Exceptions

Tribunal may award costs if:

1. Unreasonable conduct - acting unreasonably in proceedings
2. No reasonable prospect - claim/defence had no merit
3. Vexatious behaviour - pursuing claim to harass
4. Non-compliance - ignoring tribunal orders

How Costs Work

• Tribunal has discretion
• Must consider ability to pay
• Can be capped at £20,000 (summary)
• Or detailed assessment (higher)
• Rarely awarded in practice

Costs Warning Letters

Can write to other side:

• Explain why claim is weak
• Warn you'll seek costs if continued
• May encourage settlement
• Not always effective

Hidden Costs

Management Distraction

Time away from business:

• Witness time
• Manager involvement
• HR resource
• Senior leadership attention

Reputation

If case is public:

• Media coverage
• Online visibility
• Recruitment impact
• Client perception

Morale

Impact on other staff:

• Uncertainty
• Taking sides
• Watching how you handle it

Opportunity Cost

Resources spent on tribunal:

• Could be spent on business
• Or preventing future claims
• Or staff development

Cost-Benefit Analysis

Before Fighting

Consider:

• Strength of your case
• Maximum exposure if lose
• Legal costs to defend
• Management time
• Reputational risk
• Emotional toll

Settlement Comparison

Often cheaper to settle:

• Certainty of outcome
• Lower legal costs
• Quicker resolution
• Confidentiality possible
• No admission of liability

Example Analysis

Scenario: Unfair dismissal claim, 50% chance of winning.

Outcome	Cost
Win at tribunal	£15,000 legal costs
Lose at tribunal	£15,000 + £25,000 award = £40,000
Expected cost (50/50)	£27,500
Settlement offer	£15,000

Settlement may be better value even if you think you'll win.

Reducing Costs

Early Resolution

• Engage with ACAS conciliation
• Consider early settlement
• Don't drag out unnecessarily

Proper Preparation

• Organised documents
• Clear witness statements
• Efficient lawyer instructions
• Focused issues

Using Lawyers Efficiently

• Prepare materials yourself where possible
• Clear instructions
• Limit email ping-pong
• Attend meetings prepared

Consider Alternatives

• Conduct case yourself (risky)
• HR consultant (limited claims)
• Employment law barrister direct (some cases)
• Insurance (if you have it)

Legal Expenses Insurance

What It Covers

• Legal fees for defending claims
• Sometimes compensation awards
• Usually with limits

Sources

• Business insurance policy
• Standalone cover
• Trade association schemes

Limitations

• Pre-existing claims excluded
• May need to use their lawyers
• Policy limits
• Excess amounts
• Compliance with policy terms

Funding Options

For Employers

• Self-funding (most common)
• Legal expenses insurance
• Trade association support
• Fixed fee arrangements

For Employees

• Self-funding
• Legal aid (very limited)
• No win no fee (conditional fee)
• Trade union support

Practical Tips

Budgeting

Ask your lawyer:

• Estimated total cost
• Stage-by-stage breakdown
• What could increase costs
• Fixed fee options

Monitoring

Throughout proceedings:

• Regular cost updates
• Reviewing necessity of actions
• Settlement opportunities
• Budget vs actual

Decision Points

Key moments to reassess:

• After disclosure
• Before witness statements
• Before final hearing
• Any time new information emerges

Checklist

When Claim Received

• Assess strength of claim
• Estimate maximum exposure
• Get legal cost estimate
• Check insurance coverage
• Consider early settlement
• Engage with ACAS

During Proceedings

• Monitor costs against budget
• Prepare documents efficiently
• Keep settlement option open
• Reassess at key stages
• Consider costs warning if appropriate

Decision Making

• Understand worst-case scenario
• Compare fight vs settle costs
• Consider non-financial factors
• Make commercial decision
• Don't let emotion drive