Employment law on a budget

In the current economic climate many companies and organisations are understandably reluctant to instruct lawyers, as the hourly billing system means that costs can quickly spiral out of control.

This places an added burden on HR departments, which are more likely to be managing complex redundancy processes – which may be subject to the collective consultation rules – and dealing with other HR challenges.

HR professionals may have an increased need to seek legal advice, but in a cost-sensitive environment they are often unable to do so through fear of being criticised by management for incurring unexpected legal costs.

The traditional system of appointing lawyers on an hourly basis may be the best-known option, but the alternative of paying a fixed yearly charge – usually for a helpline and attached insurance policy covering awards, settlements and legal fees – has been offered by business service companies for some time.

However, the contracts for these services can often be excessive, with tales of companies having to commit forup to five years, and can be difficult to get out of when business needs change dramatically. The person on the other end of the phone is often not a qualified, practicing employment lawyer. Helplines can be staffed by juniors with little experience of workplace and employee relations, who have obtained their limited know-how from textbooks.

As every HR professional knows, the skill is to apply the requirements of employment law in a way which respects and addresses the workplace environment, and in particular employee relations. The worst–case scenario is that HR has to pay again for advice, usually from a lawyer on an expensive hourly rate.

However, some employment lawyers have restructured their pricing strategies to provide clients with the means of obtaining legal advice from solicitors through a fixed-cost package.

This allows HR departments to budget for a 12-month period, and potentially cover their entire costs for legal support in relation to employment matters for the year, irrespective of what arises in terms of employee issues and employment tribunal litigation.

This is a potentially hefty saving, given that a tribunal case can cost upwards of £20,000 in legal costs to defend, excluding any advice taken in the run-up to a dismissal.

This arrangement enables HR professionals to build up a relationship with an individual solicitor who understands that organisation and culture. Where an organisation employs HR professionals, any relationships with legal advisers should aim to enhance the HR team and work in tandem with it. The key is for HR to work with the provider to find a solution, as opposed to expecting a line of action to be dictated to them.

Those who instruct solicitors on the traditional time basis would have to adjust financial budgets in response to any specific employment-related matter that arises during the year, such as a dispute with an employee or a redundancy process.

Budgets are tight, and having to cover the unexpected cost of legal advice and litigation could be financially devastating for an organisation. Not only do we live in increasingly litigious times, but this is compounded by many organisations having to make savings through redundancies, which increases the risk of employment tribunal litigation.

If a dispute arises, those on a scheme provided by practicing lawyers can take a much more robust approach, defending vexatious or spurious claims rather than being forced to settle such claims to avoid ongoing legal costs.

Those who use lawyers on a time basis will be forced to make a commercial decision in the event of a tribunal claim when considering the cost outlay of legal fees which are not recoverable even if the employer wins.

Faced with these potential legal costs, organisations are often forced to offer some form of settlement even if they fervently disagree with the basis of the employee’s claims. Not only can this affect the culture of the organisation, where the employer becomes known for ‘paying out’, but it can negatively affect morale both within the HR team, which has had to deal with a difficult employee dispute only to see it settled, and in the wider workforce, which may have also been implicated by an individual employee’s allegation and feel embittered by any resulting settlement.

Having protection for legal fees and a reliable cost-effective advice line should free the organisation to make decisions which are not solely cost-based but also take into account the implications of any settlement made.

It is an explicit part of the personal development plan of every HR professional to keep up to date with changing statute and case law through reading and attending regular update seminars. However, the reality is that most HR professionals will have too broad a remit to keep up with the most complex issues in case law. Specialist lawyers can offer the necessary depth and breadth of experience to provide expert guidance and opinion when those difficult matters arise.

Case study – Broadway Housing

Helen Giles, HR director at Broadway Housing, says: “At Broadway we provide HR services to other charities through our Real People consultancy, so we know that a large number of organisations who use lawyers do so on a pay-as-you go basis because they were recommended somewhere down the line historically. There is also the sense of ‘better the devil you know’, and a reluctance to shop around.

“We now use SA Law’s Employer Protection Scheme, much to our satisfaction. It allows us to budget ahead, and we are guaranteed hands-on advice from practising solicitors. We also know that the solution will take into account the realities of the workplace. In the current climate I also think it is worth shopping around and looking outside the comfort zone of the central London law firms.”

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