How much is the fee?

13 January 2012

I’m still absorbing the government’s consultation on employment tribunal fees, so I don’t have detailed thoughts about it yet. But I have been thinking about the proposed level of fees.

The consultation sets out two options. Option one: an initial fee to start a case followed by a hearing fee. Option two: just an initial fee. Option two is also overall less expensive.

For an unfair dismissal claim, option one has an initial fee of £200, followed by a £1,000 hearing fee. Total cost: £1,200.

How does this compare to peoples’ earnings? On April 2011 the average weekly wage for full-time employees was £501.¹ So an unfair dismissal case would cost 2.4 weeks’ wages. Or 4.6% of the average annual wage.

But these figures are misleading in two ways. First, the average used is the mean.² This is pulled upward by the small number of people who earn a lot more than most. A better average for these purposes is the median.³ This is £404 per week. Second, the average wage is gross pay rather than take-home pay. Using Listen to Taxman to convert £404 into a net wage gives £320.

This means that an unfair dismissal claim under option one costs 3.75 weeks’ wages. Nearly a month’s salary, it seems to me, is going to be a lot for the average person to find just after they’ve been sacked.

If you do earn more than average, try working out your weekly wage and multiplying it by 3.75. Then think about how you’d find that money for an employment tribunal case if you were suddenly dismissed. Don’t forget that you will also need to pay your mortgage, bills etc…

Matters don’t look much better if we look at average savings. 27% of Britons don’t have any savings at all. And the average cash savings is £1,501.⁴ Even assuming that employees have rather more savings than the population as a whole, the tribunal fee is going to eat up a large chunk.

Option two is significantly less: a single fee of £500 to begin an unfair dismissal claim. But even so, this is much more than the average weekly take home pay or about a third of their average savings.

Discrimination cases are more expensive. Under option one there is a £250 initial fee and a £1,250 hearing fee. Total: £1,500. So this would be 4.7 weeks’ salary or all of the average person’s savings. Option two, again, is less at £600 – so 1.9 weeks’ pay.

Looking at things from the other direction, how do the proposed fees compare to the average tribunal award? In unfair dismissal, the average award is £8,924.⁵ This makes the fee under option one 13% of the average award (under option two 7%). But, again, this is a mean average, which is pulled up by a small number of high awards. The median award is £4,591, making option one 24% of the award and option two 11%.

Discrimination claims tend to attract higher awards. Again I think the median is a more realistic estimate of their average value than the mean.

Race: £6,277 – so the fee is 24% of the average award under option one and 10% under option two.

Sex: £6,078 – so the fee is 25% if the average award under option one and 10% under option two.

Disability: £6,142 – so the fee is 24% if the average award under option one and 10% under option two.

Religion / belief: £6,892 – so the fee is 22% if the average award under option one and 9% under option two.

Sexual Orientation: £5,500 – so the fee is 27% if the average award under option one and 11% under option two.

Age: £12,697 – so the fee is 12% if the average award under option one and 5% under option two.

The bottom line is that, under the proposed fees, most employees earning around the average wage will need to commit a significant chunk of their available assets in order to start a claim. This relatively high start up cost won’t, generally, then lead to a proportionately high award.

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