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Hike in unfair dismissal claims

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The economic downturn has seen a rise in the number of insurance claims made by SMEs facing legal action from employees who are citing unfair dismissal.

Insurers Hiscox have said that businesses are failing to follow correct statutory procedures when laying off staff; a failure that has left many employers open to claims from employees.

The most common mistakes made by employers, Hiscox reported, involve ignoring collective consultation procedures and obligations, necessary when 20 or more workers are at risk; not carrying out a fair and reasonable selection process; and making people redundant where the reason does not genuinely relate to redundancy.

Gary Head, an SME expert at Hiscox, said: “In the current downturn we have seen a noticeable increase in claims from employers being sued by former employees. It is quite clear that many employers are not adopting the correct procedures when faced with the decision to make employees redundant. This is particularly prevalent amongst smaller employers who do not necessarily have access to the type of HR expertise that bigger companies do.”

One of the reasons behind the rise in claims is that a significant proportion of business owners have no experience of coping with a recession and its effects on staffing levels.

Mr Head added: “Many SME owners will not necessarily have lived through a recession where redundancy has been a fact of working life and are unaware of what they need to do. All businesses should seek professional advice when it comes to making redundancies or they might find that what started out as a cost cutting exercise could cost them far more in the long run.”