Both employees and employers bear considerable direct and indirect costs both from tribunal applications and from trying to prevent applications. These costs bear disproportionately on small employers and act as a “stealth tax” discouraging employment. These are, of course, in addition to costs of running the service itself.
There does not seem to be any relationship between tribunal claims and apparent good employment practice. Large firms and public sector employers are more likely to have explicit equal opportunities policies but are more likely to face discrimination claims. There is evidence to suggest that the low-skilled and poorly paid are those least likely to be helped by the tribunal system.
Professor J. R. Shackleton, University of Westminster and Head of Westminster Business School suggests that government reforms to the employment tribunal system are unlikely to have much influence. The whole structure of labour market regulation must be reformed. The tax and benefit system should be used to achieve government objectives in the area of disability rights – rather than burdening employers with the cost of achieving what are, in effect, political objectives; inspectors may be able to enforce some types of regulation more effectively than the tribunals which benefit the articulate rather than the weak. However, the only long-term solution is a return to voluntarism and freedom of contract. It is a myth that detailed regulation is required to make employers behave reasonably. Good practice and good reputation are essential to ensure effective recruitment. Employment regulation discourages innovation and prevents, rather than encourages, the development of good practice.
Read the full report here.