Firms are becoming more exposed to increasing claims costs, says Allianz
New compensation limits for employment tribunals and redundancy pay mean that firms are exposed to increasing claims costs, warns Allianz Legal Protection.
David Vine, Allianz Legal Protection said: “Rising compensation and rising litigation pose a threat to businesses, especially smaller firms who may not have the reserves to absorb the costs.”
The higher limits, which came into effect on 1 February 2008, are:
• the maximum amount of a week's pay for calculating statutory redundancy pay, along with the basic award, has increased to £330, an increase from the previous £310;
• the minimum basic award where a dismissal is automatically unfair for failing to follow the statutory procedures is now £1,320;
• the minimum basic award for certain dismissals, has increased from £4,200 to £4,400; and
• the maximum statutory redundancy payment or basic award is now £9,900.
“Employers should note that not only could they face a payout of as much as £72,900 for failing to follow fair dismissal procedures under these regulations, there is also no upper limit in cases involving discrimination and whistle blowing. Keeping abreast of current employment legislation is vital but companies also need to review their legal expenses cover in light of these increased limits,” cautioned Vine.
Despite the potential for costly legal action, many businesses remain uninsured. Fewer than half of SMEs are believed to have cover.
