Working Theory

by Michael Reed


I do employment law for the Free Representation Unit.


michael at


Accounting for early conciliation

05 February 2013

I’ve been reading the Impact Assessment, attached to the Early Conciliation consultation. Impact Assessments tend to be rather boring. But they also contain interesting nuggets of information.

This one sets out the total cost of the Employment Tribunal system (£86.7 million), which is an interesting nugget on its own.

It also sets out the expected cost of setting up, and running the Early Conciliation process. That’s £2 million in start up costs, then £5 million a year to run.

Final nugget: it estimates the savings to the tribunal system of implementing Early Conciliation at £15 million. Or 18%.

18% is based on an estimate of the number of cases that will be diverted from the tribunal by being settled in Early Concilation. Which in turn is based on ACAS’s experience with Pre-Claim Conciliation.

I’m, rather obviously, not an experienced public sector manager. But the estimated costs savings seem terribly optimistic.

There are three problems.

First, the estimate of the likely reduction in the number of cases is, basically, a guess. It’s a good guess, being made with the best available information and by some very experienced people. But it’s still a guess. We just don’t know what will happen.

Second, the claims dealt with through early conciliation will not be evenly distributed across all the potential cases in the the tribunal. In general, I suspect, many more expensive claims will be harder to dispose of through Early Conciliation. For example, there is a significant amount of complex equal pay litigation in the tribunal system. Such cases are expensive from the perspective of HMCTS, because they involve long hearings, normally in front of the salaried judges. But they are very unlikely to settle as a result of Early Conciliation. The same is probably true of high-value city discrimination cases.

Third, the idea that a 18% reduction in cases will result in a 18% reduction in costs seems naive. Things are rarely that simple. The Employment Tribunal system has a lot of costs which will be hard to reduce in the short term, such as Estate and Judicial Salaries. Even if, in the long run, these can be reduced, I doubt it can be done quite so efficiently.

In fairness, the Impact Assessment recognises many of these problems. It lays out some of them, and often uses phrases like ‘It is important to note (as with all the estimates in this IA) that there is considerable uncertaintly surrounding these savings.’

But, given the uncertainty around all of these figures, I think there is a real risk that the the costs savings will drop below 6% – at which point Early Conciliation will be costing more to run than it saves. And that ignores the start up costs and assumes that the estimates of how much it costs to run will prove accurate.

This may not be a bad thing. If Early Conciliation saves a significant number of parties from going to the tribunal by facilitating equitable settlements, I’d say it was worth paying a few million for. But I’m not sure everyone would agree.

Unfortunately, I don’t think we’ll get to find out whether I’m right to be concerned. Fees are being introduced at more or less the same time as early conciliation. This will almost certainly have a dramatic impact on the number of tribunal claims (and the costs of running the tribunal system). We’ll probably never be able to untangle which policy had what impact.

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