The truth about Tribunal Indemnity Insurance

Many busy SME owners choose outsourced HR providers based on the fact that Tribunal Indemnity Insurance is offered and so they feel they have mitigated against a potential financial risk and made a good choice.

However many don’t fully understand what this insurance is and the impact on their business of signing up to such a service. They also have little idea of what risks if any they actually have in their business of someone making a successful claim against them. This blog explains it further.

What is it Tribunal Indemnity Insurance?

Because employment law can appear complex and full of tricky loopholes, the scaremongers selling tribunal indemnity insurance often have a field day by playing on people’s fears of something that can in many circumstances be prevented.

Tribunal indemnity insurance takes various forms which range from insurance against all legal and compensation costs arising from a tribunal claim, to just simply covering legal costs or nothing at all because you didn’t follow their rules.

As with any insurance policy, the first step is to think about the risk you are insuring against. It’s an easy decision for an electrical firm with a warehouse near a river to insure against flood damage. If there’s a flood, all of the stock could be wiped out and the business could go bust. The risk is high, and so is the potential cost of the insured event.

For business owners, it’s not so easy to quantify the risk and potential costs of a tribunal claim, so they go for peace of mind, and take the insurance. The reality is that there are many steps in the journey to an employment tribunal, and an employer who has sensible HR policies and procedures in place, and follows them, is at a very low risk of losing an employment tribunal claim. Even if the employer loses the claim and has to make a compensation payment, the costs are often nowhere near as high as expected.

The claim with the highest sum awarded was in a sex discrimination claim. These are technically uncapped, and can also include awards for injury to feelings.  But the median award in 2016/17 for Sex Discrimination claims was £8,381and for Disability Discrimination it was £10,235. Although there will always be media stories about huge successful claims, they are rare, and the median award is a more realistic indicator of your potential financial risk. The median compensation payment for Unfair Dismissal claims in the same period was £ 7,521.

Three things you should know about Tribunal Indemnity Insurance

No 1 – You may not even need it

The electrical services company will not sit and watch the river rising or not worry about their stock, just because they have insurance. They will use sandbags, move the stock to higher shelves, and stand by with buckets to bale out the water as it flows in. Nobody wants to have to deal with the aftermath of a flood. It’s better to prevent the damage in the first place. If business owners took the same approach to people issues, and took notice and practical action early on, there would be little risk of a tribunal claim, and therefore little need for an insurance policy.

There are HR experts, like us, who can explain all the rules, and help managers to take each step carefully, ensuring that employees are treated fairly and that the needs of the business are also met. This is equivalent to using sandbags.

If managers are not capable of handling an issue with performance, or there is a persistent problem, such as bullying and harassment, then HR experts, can provide training, coaching and even hand holding to support them. This is effectively like moving the stock to higher shelves. But the effect is longer lasting as they are learning how to manage such situations and won’t be fearful of them.

If matters are so serious that the employee is likely to be able to make a claim at an employment tribunal, there are HR experts like Amelore, who can help the business to evaluate the risk of a successful claim, and mediate between the employer and employee.  If that doesn’t work/or it’s to late for that then they can negotiate the terms of a settlement agreement, making a financial payment to the employee to leave the business and waive all their rights to making a claim against you. This is not desirable, and does cost money, but still salvages the situation, a bit like baling water with a bucket. However often this will be much less than you think.

No 2 – Not all of your costs will be covered

If the tribunal claim goes ahead, there will be legal costs, but much more significantly, there will be huge management time lost in the preparation and aftermath of a tribunal – these costs will not be covered by the insurance. The impact on employee motivation, and even on management morale, which ultimately hits the bottom line of the business, doesn’t have a price, and therefore isn’t covered by the insurance.

Using a pragmatic, knowledgeable HR professional to avoid the problem will always be cheaper than paying a lawyer to fix it.

No 3 – Insurance companies don’t like paying out

The real nub of the issue is this – there are so many ‘get out’ clauses in the tribunal indemnity insurance, that an employer runs a real risk of thinking they are covered, only to find that the insurance company then gives lots of reasons why they won’t pay out.

If the insurance is offered as part of an HR service, there will be a big caveat stating that if the employer doesn’t consult the service provider and follow the employment law advice to the letter, the insurance will be invalidated.

This also means that the HR service provider is likely to sit on the fence, or tell their client what the law is, without committing to a recommendation, for fear of invalidating the insurance. So the whole process will go on and on whereas most SME’s need a quick resolution so they can focus on their business.

Some providers may even boast that they help their clients to make sure their paperwork is correct, so that if a claim goes to tribunal, they will have a ‘bundle’ already prepared, saving lots of time. It doesn’t save lots of time for the business owner or manager trying to do their day job and providing them with that paperwork.

In our experience the vast majority of employees are reasonable people, who in turn want to be treated reasonably by their employer. The vast majority of managers and business owners want to have happy, engaged employees.

Surely everyone’s time and effort would be better spent building good relationships, ironing out misunderstandings, and dealing in a reasonable way with problems, than filling in forms, following scripts and ticking boxes to make sure that the tribunal insurance is not invalidated?

Summary

So in summary our advice is if you are looking at HR outsourcing providers don’t base your decision on fear.  Fear of something you don’t fully understand. If anyone is selling you their services and using fear as their main incentive ask yourself why?

A good HR outsourcing provider will audit your business and then make clear practical proportionate recommendations to ensure you are legally compliant and have good HR practices embedded. This may involve training your managers. This significantly reduces the risk of a successful claim against your business.

Also take care that the outsourced HR provider you select doesn’t tie you into a long notice period as that will tell you something important about them. Long notice periods are designed to cover poor service. Most SME’s don’t have the time or the energy to battle their way out of a contract they have signed in a rush without understanding the potentially negative consequences.

If you do have an employee dispute and are supported by an outsourced HR provider that doesn’t offer Tribunal Indemnity Insurance, this will be dealt with swiftly and you will benefit from pragmatic commercial advice about your options and any risks.

At Amelore we don’t offer Tribunal Indemnity Insurance. We work with businesses and individuals and firm but fair. We have also never been successfully taken to an Employment Tribunal.  We are not complacent about that fact but we are extremely proud of it.

GDPR – Employee record keeping and beyond

In a series of blogs, Amelore begin to look at GDPR from a HR perspective to ensure employers are ready for the new requirements in respect of their employee data and beyond. This will form part of a continuous focus on this hot topic until May 2018 when GDPR goes live. We appreciate many companies may not yet of begun their GDPR journeys, so we will be offering advice and guidance in short blogs.  We will also help to signpost employers to useful information which extends beyond the processing of employee data.

GDPR is itself an extension of existing UK data protection laws. This new legislation builds on the Data Protection Act (DPA) which employers already need to adhere to. DPA principles cover areas such as ensuring employers keep accurate, secure information.

The ICO (Information Commission’s Office) are at the forefront of helping organisations understand this evolution of our data protection laws. They recently published GDPR Myths. This series of blogs helps to demystify the new regulations.

Data breach – what an employer needs to do?

In ICO’s latest blog they provide valuable advice and guidance on how employers need to respond if a data breach occurs. They report that some employers have expressed concern that any data breach needs to be reported and that huge fines will ensue. The ICO say this is not the case and that only breaches that are likely to risk people’s rights and freedoms will need to be reported.

The ICO also point out that fines will be proportionate and that companies who are open, honest and report without undue delay can avoid fines. It is expected that by now, larger organisations will already have appointed a Data Protection Officer (DPO). However, smaller organisations are also advised to consider who in their organisation is responsible for data. We would advise all organisations, no matter how small, to know who is responsible for data (again not just employee data) and who is responsible for reporting a breach should it occur. This starts to form a robust approach to data governance.

Employee data processing

Employee data processing will be a key focus for many organisations, however some employers may be worried about any potential changes to how they currently store their data.

All organisations will be storing employee records in some way, shape or form; so you are now advised to review these filing systems, including the security of the data you are processing in respect of employing people, to ensure robustness. We have already observed some organisations writing to their third-party data processers asking for evidence of their compliance.

Handlers of this data need to make sure they are processing data fairly and for legitimate purposes. Furthermore, if they are transferring it outside of the EEA there are specific safeguards in place.

For those employers wondering if the UK’s exit from the EU will affect GDPR the government has already confirmed it will not. However, please note that International companies operating across EU states will need to work out who their lead data protection supervisory board is.

Further still, forming a data protection working party or project team to audit what data is being processed is also advisable. Many companies are already helping organisations with data mapping and auditing. Amelore work closely with Mazars to provide a range of services for our clients.

In summary, the good news is that common sense does prevail and that the processing of data where it is necessary for the performance of a contract will be a valid reason for processing. If you have any queries or questions in relation to any of the points made please contact Amelore for further advice and guidance.

We will continue to focus on this topic as we approach next year tackling other aspects of the GDPR (link to first blog) in further detail; such as consent, the right to be forgotten, and subject access requests.

 

Our top 10 tips regarding “Right to Work Checks”

Every employer is aware that it is unlawful to employ someone who does not have the right to carry out the work in question, and employers can be subject to a civil penalty of up to £20,000 per worker for any breach of this.

Avoiding the £20,000 penalty

It is possible to establish a statutory (legal) excuse in respect of such penalties provided that the employer checks the worker’s documents prior to employment commencing, and then repeats the checks for those workers who have time limited permission to work in the UK.

Generally, UK nationals and European Economic Area (EEA) nationals have the automatic right to work in the UK, whereas migrant workers from the rest of the world will need to establish this right to work by showing that they have appropriate permission under one of the tiers of the UK points based system, by way of another form of visa, or under other European Treaty rights.

However, it is important that checks are carried out consistently on all employees and below we detail our top tips on what to do and some potential pitfalls.

  1. Obtain

Obtain an original of one or more documents listed in the Home Office’s Guidance.

The Home Office has produced a helpful right to work checklist which details those documents that can be relied on.

This list is “non negotiable” and no other documents “will do”. You have been warned!!

  1. Check

Check the document in the presence of the holder.

It is surprising the number of employers who arrange for reception staff or managers to take copies of the document but then in fact pass these copies onto the HR function to validate. This is not strictly compliant. Whoever is in the migrant’s presence when the document is presented should be the person doing the check. HR can of course assist, but the ultimate responsibility lies with this individual, so ensure that he or she has had appropriate training.

  1. Make a copy

Take a clear copy of the document(s). If the copy is blurred, illegible or has information missing/cut-off the statutory excuse will not be achieved. This sounds obvious but you’d be surprised.

This copy should then be marked as a true copy of the original, clearly signed and dated, and then stored or scanned and filed securely. Beware Biometric Residence Permits (BRP’s). It is mandatory to copy the front and back if the statutory excuse is to be secured.

  1. Check the documents thoroughly

It is not simply a matter of taking a photocopy. Make sure you check the validity of the documents, for example that the photos are consistent with the actual appearance of the individual and that any stamps/endorsements look genuine.

If you are given a false document, you will only be required to pay a civil penalty if it is reasonably apparent that it is false, and that means it has to be properly checked.

  1. Specifically check the terms of the visa:

Make sure the job you provide does not break any conditions or restrictions on the type of work an individual can do, or the hours they can work (see below). The terms of the visa or work permission should clearly say what these are. Again, a proper considered check is vital to securing a statutory excuse.

  1. Beware students:

It is important to be aware that non EEA migrants who come to study in the UK under Tier 4 of the points based system are generally entitled to work for a maximum of either 10 hours or 20 hours per week term time (dependent on the course and the educational establishment), and for any period during vacations and following the end of the course to the expiry of their visas.

Since May 2014 it has been the employer’s responsibility to check the dates of working against the student’s published term time tables. If a student is found to be working over the permitted hours during term time then they will be working unlawfully and you will not have a statutory excuse. That additional extra hour of work could therefore cost the business £20,000 per student, so do be sure to check.

  1. Beware discrimination claims:

In an attempt to avoid a £20,000 penalty do not then risk a claim of discrimination, which could prove even more costly. Presumptions should not be made about a person’s right to work in the UK based simply on the basis of their background, appearance or accent. As stated, apply the checks consistently to all workers regardless.

  1. Be mindful of ANY staff that have come TUPE

Yes, that four letter word again. Any employer who “inherits” employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 would be wise to carry out the right to work checks on all transferring employees if it wishes to be certain it has the statutory excuse.

You have a grace period of 60 days to do this and although you may be able to rely on any checks previously carried out by the transferor, there is no guarantee that these will have been done correctly.

  1. Don’t risk it:

£20,000 is the fine for unlawfully employing a worker subject to immigration control, if this is by mistake / oversight / incompetence. If you know the migrant does not have permission to carry out the work in question then the penalty is unlimited and the owners of the business can be sent to prison for up to two years, and this is set to rise to five years.

  1. If you are audited and fail – take urgent advice!

If, for whatever reason, a statutory excuse is not obtained and the employer finds that it has unknowingly employed a worker unlawfully or finds itself the subject of a Home Office audit, or even “raid”, all is not lost. There are still ways in which to seek to avoid or mitigate any civil penalties but in that eventuality it would certainly be sensible to seek urgent professional advice.

If you would like a review of your current employment practices with a particular focus on your starter and leaver processes, contact Amelore for more details.

www.amelore.com

Gender pay – How ready is your company?

gender equalityMore than four decades after the Equal Pay Act, the gender pay gap still stands at about 19%, with the average British woman earning around 80p for every £1 earned by a man.

In October 2016 the Government will introduce Regulations that require all companies with 250+ employees to carry out a gender pay review, and publish their data.  This has implications for the company’s reputation, its ability to attract and recruit staff and could also trigger equal pay claims from existing staff.

The Regulations will make changes to the Equality Pay Act 2010, and aim to “end the gender pay gap in a generation” (David Cameron). They will take effect from 1 October 2016 with the first reports needing to be published before 30 April 2018 and then annually by 29 April.

Getting prepared

Has your company ever carried out an equal pay audit? Do you know what your issues are and are you taking steps to resolve them?  If not, we strongly recommend that you consider carrying out an Equal Pay Audit this year ahead of the compulsory reporting dates so that you are not caught by surprise and can address issues early on.

A confidential Equal Pay Audit will:

  • Review and analyse gender pay
  • Identify any gaps and risks
  • Examine which objective justifications exist
  • Make recommendations for resolving areas of high risk.

Facts and Figures

The UK’s gender pay gap currently stands at 19.1% (Office for National Statistics, 2014) – forty four years after the Equal Pay Act was introduced – and lags behind the rest of Europe on 16.4%.

The new duties apply to private and third sector employers, employing 250 or more staff within Great Britain, and include limited companies, LLPs, statutory bodies and unincorporated associations.

Employers will have to provide and publish five items of gender pay information: the mean and median gender pay gap, the mean gender bonus gap, the percentage of men and women in the bonus scheme, and the distribution between men and women in salary quartiles.

The September 2015 Business in the Community Survey reported that 89 per cent of employees said they would feel more negatively towards their employer if the gender pay gap was relatively large in their organisation.

However if it was relatively small, 71 per cent would feel more positively towards their employer.

Do employers intentionally pay women less than men?

Not they don’t do this intentionally but they can often do it unconsciously.  Men are often much better at negotiating when they join an organisation. Women have the expectation that if they work hard and are good at their job so they will be fairly rewarded. Whilst this is true it is extremely rare for an employer or HR professional to review salaries with gender in mind.  If someone is earning less than they could or should, this is seen as operationally savvy and commercial. Good management even.

women high five

We have reviewed many employer data sets and observed stand out discrepancies which are explained away as historical, personality or line manager driven and as such no longer issues.  However if an organisation is paying a woman or women less than men in equivalent roles for no tangible reason, this will not only need to be rectified urgently but could result in resignations and a damaged employer brand and/or Employment Tribunal proceedings.

Benefits to the organisation

Pay is at the heart of the employment relationship, it influences how valued an employee feels and can act as a powerful demotivator if you get it wrong.

As an employer you will need to go public with your data, publish it on your website and upload it to a government website.

It is worth looking at the information early to assess what risks you are carrying and what measures need to be put in place over the next year to two before the first reports are published. Carrying out an audit now will help you comply with the law and good practice.

It is important that you feel confident that any analysis has been carried out reliably and that valid defences are understood or that indefensible issues are tackled so that you have fair, rational and transparent pay for your employees.

Understanding your risk profile and the measures to reduce these risks will protect your company from reputational and financial risks.

How we can help?

Amelore can conduct a gender pay audit and provide you with a report and recommendations now so you can address any issues before this legislation takes effect.

www.amelore.com