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Understanding unfair dismissal fines for your company

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Reviewed: 22nd June 2019

My company can't pay unfair dismissal fines

Unfair dismissal fines can be imposed if an Employment Tribunal rules that a staff member has been dismissed unlawfully

UK employment law lays down the grounds for which the dismissal of an employee is fair and unfair. If you dismiss a member of staff you must be able to prove at least one of the fair reasons as set out in the Employment Rights Act, 1996, otherwise the dismissal could be regarded as unfair and unlawful.

There are various reasons for dismissal that are automatically regarded as unfair, with examples including pregnancy/maternity, trade union membership, and the taking part in lawful industrial action.

What are unfair dismissal fines?

Unfair dismissal fines can be imposed if an Employment Tribunal rules that a member of staff has been dismissed unlawfully. Compensation typically consists of two elements:

  • A basic award calculated using an employee’s length of service, age, and weekly wage. The maximum basic award is currently £15,750
  • A compensatory award may include elements such as compensation for loss of wages or pension, and is based on the Tribunal’s view of what is ‘just and equitable’ in individual cases. The maximum basic award (from April 2019) is £86,444

Being taken to an Employment Tribunal for unfair dismissal is worrying indeed, but what happens if your business is fined for unfairly dismissing an employee and you can’t afford to pay? 

What happens if I can’t pay fines for unfair dismissal?

If you can’t afford to pay the fines imposed for unfair dismissal your former employee can apply to their local county court or the High Court for bailiffs to collect the debt. They may also submit a Penalty Enforcement Notice to the Department for Business, Energy and Industrial Strategy (BEIS).

This department then sends a warning notice giving you 28 days to pay. If the demand remains unpaid you may receive a further penalty of up to 50% of the original fine, and also risk being publicly named by the government for non-payment.

Naming Scheme for unpaid Employment Tribunal awards

The ‘naming scheme’ was introduced on 18th December 2018 following the Taylor Review of Modern Working Practices. If the judgment against you was made on or after this date and involves compensation of £200 or more, you could be considered for inclusion and naming.

Employers are named via a press release from the Department of Business, Energy and Industrial Strategy - you would receive a letter notifying you that your business will be included in the next release.

How can I pay my unfair dismissal fines?

There may be a number of solutions if you can’t pay your Employment Tribunal fines. It’s advisable to seek advice from a licensed insolvency practitioner (IP) to establish your best options, which may include the following depending on your circumstances.

Additional finance

Fines for unfair dismissal can be significant and you may need a lump sum of cash to pay them in full. If you own hard assets of value, such as equipment or vehicles, you could be eligible for an asset-based loan as an alternative to obtaining a ‘traditional’ bank loan.

This would involve selling and renting back the assets so you receive a cash lump sum with which to pay the unfair dismissal awards, but you’d retain full access to the assets in question.

You may also be able to appeal against the Employment Tribunal judgment. Real Business Rescue has extensive experience of helping businesses in debt, and can offer independent advice if you’re unable to pay unfair dismissal fines. We operate an extensive network of offices around the UK, and offer free same-day consultations to quickly establish your best options.

Jonathan Munnery

Partner

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