It has been confirmed that as of April 2016 employers who fail to promptly pay awards made by the Employment Tribunal will be subject to an increase in the sum to be paid if they fail to respond to a penalty notice. The figure in question will be 50% of the amount due, and will be subject to a £100 minimum and £5,000 maximum.
Controversially, this sum will be paid to the government and not to the employee in question, despite the reasonable assumption that it will be the claimant who will have suffered as a result of a failure to pay. This mirrors a similar provision introduced in 2014, in which employers who are considered to have “aggravated” a breach of the claimant’s employment rights are subject to a penalty to be paid to the Secretary of State. In both cases, liability can be reduced by half if the employer promptly pays the outstanding sum as well as the penalty in question.
Employers who are facing a tribunal claim should be mindful that these penalties do exist, and therefore if a defence should fail at a final hearing, it is best to avoid adding insult to injury by ensuring any compensation is swiftly paid to the claimant. Companies facing cash flow problems can take some comfort from the fact in relation to the “aggravating factor” penalty currently in force that the tribunal is obliged to take into account the employer’s ability to pay. It can also consider the size of the business in question, whether it has a dedicated HR team and if the infringement in question was the result of a genuine error or a repeated and/or malicious breach. It seems therefore unlikely that a small organisation committing a relatively minor procedural breach of an employee’s rights would be penalised in this manner.
However no guidance has yet been published in relation to how the most recent penalty being introduced in April will be enforced. By its very nature it seems unlikely that the tribunal would be minded not to implement a penalty as a result of financial difficulties, therefore this is likely to be a more widely enforced provision and as such of more concern to employers.