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M&G PALADIN
EMPLOYER PROTECTION SCHEME
Frequently Asked Questions & Answers
Q. What is the Employer Protection Package?
A. It is a seamless combination of solicitor employment law services and
insurance that provides businesses with the most cost effective way to
alleviate the burden of employment and health and safety legislation.
Q. I’m a good employer –
an employment dispute is improbable, so why should I worry?
A. The chances of being involved in an employment dispute are already higher
than your business incurring a serious loss from fire or theft. You readily
insure your assets against traditional perils so why would you leave your
balance sheet exposed to this increasing threat? Just read the newspapers
and see the headline figures and you will find frequent reports of individual compensatory
awards in excess of £100,000.
Q. Newspapers focus on the extraordinary.
How much is seriously at risk?
A. The number of grievance claims lodged with the employment tribunals
surged by one third in the 12 months through to March 2006, despite the
introduction of new rules aimed at resolving disputes away from the courts.
With age discrimination legislation coming into force in October 2006 this trend is
certain to continue. Awards for unfair dismissal have increased beyond
£50,000 and awards in relation to discrimination are unlimited; this means
that your business could be exposing its balance sheet to serious and
possibly crippling financial losses. The average cost of claims is
increasing (the average award for a discrimination claim is just under
£18,000).
Q. I am only a small business with a few employees so I'm not high risk,
am I?
A. Employment legislation applies equally to all employers regardless of
the size of their business. Unlike big organisations, which can budget for in-house HR
advisors and comprehensive risk management, smaller businesses employing
fewer staff are at greater risk as they lack the management time and
resources to manage their staff effectively. Fines, penalties or awards for
breaching legislation are not calculated with reference to what a business
can afford and this puts smaller businesses at greater risk. They are often
unable to withstand the un-budgeted and costly outcome of a dispute with
just one employee.
Q. How easy would it be for one of my employees to bring a claim against me?
A. It has never been easier and employees have a greater awareness of their
rights and how to play the system today. With information on the internet,
solicitors buying claims (no win no fee) and the Citizens Advice Bureaux
(along side many other free advisory services) employees need to pay
nothing and do very little to lodge a Tribunal claim against you. Once you
have received notice of a claim you have to respond correctly and the costs
then begin to mount.
Q. How much can an employment dispute cost me even if the employee is just
trying their luck and I have done nothing wrong?
A. The cost of getting a solicitor to prepare a response to a claim by an
employee (ET1 Form) is in the region of £1,000 and if the case progresses
towards Tribunal another £1,000 can easily be spent as the case progresses,
whether on solicitor fees, interview attendance or other costs such as
medical opinions. If the case does reach Tribunal then the average cost of
just one day in Tribunal is £2,000. So you can see that in monetary terms even a
simple case resulting in 1 day at tribunal can cost £4,000. This cost does
not take into account the wasted management time, business disruption, staff
morel issues and bad publicity that could result from a dispute.
Q. Surely if someone is just “trying it on” they will have to pay our costs
once it has been proved their claim is unfounded?
A. Employment Tribunals do not work the same way as other types of
litigation. The employee can have their dispute heard in Tribunal at no cost
and your representation costs are normally not recoverable. Also the new
grievance and disciplinary rules mean that if you have made a procedural
error in the handling of even those unfounded claims a Tribunal is likely to
find against you. Employers are never really winners at Tribunal.
Q. How does the package work?
A. It delivers a dedicated and effective fixed-cost
employment risk-management solution that makes compliance easy and unexpected costs from
disputes a thing of the past. In short, we get you compliant, we give you
expert advice to help manage your staff in a way that is best for your
business and we protect your business from the cost of employment disputes.
Q. I already purchase a similar service through an HR company
- why is yours
better?
A. We are confident that because we are local experienced solicitors whose
primary duty of care would be to your business we will outperform other solutions in the market place. In addition to the expert personal
nature of our advisory service, the employment disputes insurers have
authorised us to handle any claims on your behalf under the policy: this
means you have seamless risk-management and insurance protection that you
can be certain of.
We would be happy to talk to you about the
comparative advantages of the package over your existing arrangements should you require.
Q. What is the employment disputes indemnity insurance offered as part of
the package? How does it work?
A. The policy will cover the costs of
Tribunal awards and/or cost of settlements agreed as a result of
conciliation proceedings arising in respect of a dispute with a previous,
existing or prospective worker. It also covers the legal fees incurred by
the solicitor in handling an employment dispute, any third party costs or
disbursements incurred.
The level of cover will have been selected by you at the time of purchase
and will be stipulated in your insurance cover note. This will include the
applicable excess and limit of indemnity in respect of each and every claim.
It is a condition of the insurance that you follow the advice of the
solicitor.
The full policy wording showing terms and condition is available if requested.
Q. If the solicitor gives such good advice and I have all the right
employment contracts and procedures why should I need insurance?
A. We regularly see cases where making the right decisions as an employer is
not enough to prevent claims arising, whether it is as a result of the
actions of rogue managers, or just of disgruntled employees. Unfortunately some
employees are becoming experts at creating claims which can
still incur substantial legal fees and often require settlement as the most
effective method of alleviating a dispute.
It is important to note that under discrimination legislation there is a
presumption that employers are liable for discriminatory acts carried out by
their employees whether done with or without their knowledge. Awards for
discrimination are unlimited.
For this reason employment disputes indemnity insurance is provided as part
of the package. This protects you from unforeseen legal costs, settlement
payments and possible awards of compensation that are not budgeted for.
Q. I have a legal expenses policy that covers employment disputes already so
why should I switch to this?
A. Unfortunately it is common for traditional legal expenses claims to fail
because the Insured has breached their policy conditions by not having
adequate employment contracts or practices or has inadvertently taken an
action that insurers deem to have compromised the defence of a claim. Unless
you have had a claim you will probably not be aware of this problem and you
should be aware that by the time this comes to light it is too late.
If you are interested in finding out more about the pitfalls of buying
legal expenses insurance please see the last question of these FAQ’s .
Q. Having an insurance policy that covers the legal costs and compensatory
awards involved in an employment dispute does not stop the disruption to my
business, bad publicity or wasted time by our staff in having to handle the
dispute.
A. Because you are dealing with your solicitor on a regular basis we are
able to catch employment issues at the earliest opportunity and prevent many
claims developing, leaving you to concentrate on running your business. The
package is specifically designed to settle problematic disputes prior to
Tribunal further reducing wasted time and saving you from becoming embroiled
in lengthy and difficult disputes.
Q. Will the scheme affect my client-solicitor relationship?
A. The basic answer is “no”. The solicitor will continue to give you
independent expert advice and to act only in your best interests. However,
they will advice you on the consequences to the cover if you take any
particular action.
Q. How much does it cost?
A. A lot less than you think – just consider the
defence costs, funding unbudgeted compensatory awards and the disruption to your
business. We are confident that you will find the cost of this essential
protection excellent value. Remember, Directors can personally be at risk
for failing to implement compliant procedures that protect employees’ rights
– can you afford not to talk to the experts?
Q. Why shouldn’t I buy employment disputes legal expenses insurance without
properly risk-managing my employment practices?
A. Nearly all polices exclude claims if there are no reasonable prospects
mounting a satisfactory defence (this is determined by your insurer). If you
do not operate with the following employment practices you will be very
lucky to have your claim covered and you will find out when it is too late!
• Clear Set of Terms and Conditions
• Clear Employee Handbook
• Clear Policies and Procedures
• Clear Letters and Forms
• Clear Database and Records
• Continuously Updated Documents
Unless you apply risk-management in these areas you are buying insurance
which will not be effective.
In addition, if you take any action that could harm the defence (again in the
opinion of your insurer) you will negate your policy cover. For this reason
it is essential to have access to qualified advice on your day-to-day
employment matters.
Your reactionary insurance may cover the consequence of a financial loss but
it will not cover
• Business disruption & Wasted Management Time
• Bad publicity or staff relations
These can be very substantial costs to a business that only early
professional advice and adequate risk-management will avoid
Your insurer may offer a helpline but this may only go as far to advising
you to protect their insurance policy.
Without an adequate advice line how can you be sure:
• That you receive independent advice on consequences of business decisions
relating to your employees. It is easier for insurers to advise you to take
no action rather than expose their policy and this can be restrictive.
• Exactly how your insurance cover will be
affected prior to taking any
action
• That you do not negate your insurance protection unwittingly when an incident
arises.
• That what you knew last year is the same this year as employment legislation is
constantly shifting.
If you have employment disputes insurance, who assists you in handling your
claim? Many clients who have legal expenses insurance still have to pay an
employment solicitor to handle their claims and present their interest to
the insurers.
We hope that these questions and answers have assisted in explaining some of
the key benefits of this professional package. We strongly believe the
combination of expert solicitors and insurance provides our clients with the
best solution to this growing problem area for businesses. If you have any
further questions that do not appear in this document we would be more than
happy to answer them for you.
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