October 2013

According to figures released by the Ministry of Justice, employment tribunals accepted over 190,000 claims by employees in the year ended 31 March 2013. The most common claims related to working hours, unauthorised deductions from wages and salaries, unfair dismissal and discrimination, e.g. on the grounds of sex, disability, race or age. In addition to loss of basic salary, allowances and overtime, claims in employment disputes may include loss of benefits in kind such as rights accrued under share option schemes and loss of pension rights.

Limits to Awards

The upper limit on compensatory awards by employment tribunals for unfair dismissal was raised from £72,300 to £74,200 on 1 February 2013. In cases involving discrimination there is no limit to the amount which may be awarded. Certain cases such as those relating to breach of contract may be brought in the Courts, where there is similarly no limit on awards.

Expert Accountants’ Role

Expert accountants may prepare estimates of a claimant’s loss in employment disputes or may carry out a critical review of such estimates, and will need to address some or all of the following issues:

  • the claimant’s loss of income, accrued pension rights and other benefits in any period of unemployment immediately following the point when the claimant ceased to work;
  • the duration of unemployment, i.e. the time taken by the claimant to find another job comparable to that which he or she was carrying out prior to leaving;
  • the extent to which earnings, pension rights and other benefits provided by any job obtained by the claimant after the dismissal or similar event differ from those provided by the job from which he or she was carrying out prior to that event; and
  • the tax consequences of an award, given that the first £30,000 of non-contractual compensation for termination of employment may be tax free.

Case Studies

Examples of our involvement in employment disputes include the following:

  • The purported dismissal of a senior local government employee was quashed by the Court. We quantified the former employee’s claim for loss of earnings and pension rights: our work included a consideration of her complex pension arrangements.
  • Two retired employees claimed against their former employer following its termination of private medical insurance cover for them after their retirement. Acting on instructions from their solicitors, we quantified their losses by reference to the premiums which would have been payable during their expected life spans.  An out of court settlement was accepted on the basis of our report.
  • We were instructed by the Commission for Racial Equality, now part of the Equality and Human Rights Commission, to quantify the loss of earnings and pension rights in a race discrimination case.  The claimant had retired early.  We carried out a detailed examination of the claimant’s earnings and of his prospective pension rights: our report informed the employment tribunal’s decision to award the claimant substantial damages.
  • A senior manager was made redundant by an NHS Trust, obtained a similar job and claimed against her former employer for lost pension benefits.  The defendant’s solicitors instructed us to quantify the claimant’s benefits from the former and the new jobs.  Our assessment of her loss was accepted by the claimant’s representatives and the tribunal.

Conclusions

Loss of earnings and benefits are important issues in many employment disputes.  Fringe benefits and pension arrangements may be complex and a claimant’s total loss may therefore be difficult to assess.  Given that employment tribunals are able to make significant awards, there are many cases in which it is cost-effective to seek the views of expert accountants.

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