An employment tribunal is a specialist court that hears disputes between employers and employees (or former employees) about employment rights. For employers, a tribunal claim represents a significant cost in management time, legal fees and potential compensation – even when the claim is successfully defended.
Understanding the tribunal process, the financial risks involved and how to prepare is essential for any business that employs staff.
Types of claim
Employment tribunals hear a wide range of claims. The most common are:
| Claim type | Qualifying period | Compensation limit |
|---|---|---|
| Ordinary unfair dismissal | 2 years’ continuous service for dismissals before 1 January 2027; 6 months from that date | Basic award + compensatory award (capped at the lower of the statutory limit and 52 weeks’ gross pay) |
| Automatically unfair dismissal (e.g. whistleblowing, pregnancy) | None (day-one right) | Uncapped |
| Wrongful dismissal (breach of notice) | None | Capped at £25,000 in tribunal |
| Discrimination (Equality Act 2010) | None | Uncapped |
| Unauthorised deductions from wages | None | Amount of the deductions |
| Redundancy pay | 2 years’ continuous service | Statutory redundancy pay owed |
| Breach of contract | None (but must arise on termination) | Capped at £25,000 |
| Equal pay | None | Up to 6 years’ back pay |
Claims for unfair dismissal, wrongful dismissal and redundancy pay make up a large proportion of tribunal work, but discrimination claims pose the highest financial risk because compensation is uncapped and can include an injury to feelings award.
The tribunal process
ACAS Early Conciliation
Before filing a claim, the claimant must notify ACAS (Advisory, Conciliation and Arbitration Service) and go through Early Conciliation. This is a mandatory pre-claim process designed to resolve disputes without a hearing.
- ACAS contacts both parties and attempts to broker a settlement
- The conciliation period is up to 6 weeks (one calendar month, extendable by a further 2 weeks)
- If no settlement is reached, ACAS issues an Early Conciliation certificate, allowing the claimant to proceed with a tribunal claim
Around a third of cases are resolved at the ACAS stage, making it a genuinely useful opportunity to settle before costs escalate.
Filing the claim
The claimant files an ET1 form with the tribunal, setting out the details of their claim. The employer must respond by filing an ET3 form within 28 days of receiving the claim.
Failing to file an ET3 on time is serious – the tribunal can issue a default judgment against the employer.
Case management
After the ET3 is filed, the tribunal issues case management orders setting out the steps each party must take to prepare for the hearing:
| Step | What it involves |
|---|---|
| List of issues | An agreed list of the legal and factual issues the tribunal must decide |
| Disclosure | Exchange of relevant documents between the parties |
| Witness statements | Written statements from each witness, exchanged in advance |
| Bundle | A paginated bundle of all documents to be referred to at the hearing |
| Schedule of loss | The claimant’s calculation of the compensation they are seeking |
The final hearing
At the final hearing, both parties present their case, call witnesses and cross-examine the other side’s witnesses. The tribunal panel consists of an Employment Judge (legally qualified) and, in discrimination and certain other cases, two lay members. Hearings are held in public, and the tribunal issues a judgment either on the day or reserved for a later date.
Costs and financial exposure
Legal costs
Employment tribunals do not generally follow the “loser pays” principle that applies in most civil courts. Each side normally bears its own legal costs.
| Cost element | Typical range |
|---|---|
| Solicitor fees for a straightforward unfair dismissal claim | £5,000 – £15,000 |
| Solicitor fees for a discrimination claim through to full hearing | £15,000 – £50,000+ |
| Barrister fees for a one-day hearing | £1,500 – £5,000 |
| Barrister fees for a multi-day discrimination hearing | £5,000 – £20,000+ |
| Management time (preparing documents, attending hearings) | Significant but unquantified |
When costs are awarded
A tribunal can make a costs order if a party acted vexatiously or unreasonably, the claim or response had no reasonable prospect of success, or a hearing was postponed because of a party’s conduct. Orders can be up to £20,000 without a detailed assessment, or unlimited following one.
Compensation awards
Unfair dismissal compensation has two elements:
- Basic award – calculated in the same way as statutory redundancy pay, based on age, length of service and weekly pay (subject to the statutory cap on a week’s pay)
- Compensatory award – loss of earnings, benefits and pension, capped at the lower of the statutory limit and 52 weeks’ gross pay
For automatically unfair dismissal and discrimination claims, there is no cap on the compensatory award. Discrimination awards also include:
- Injury to feelings – assessed using the Vento bands (lower, middle and upper bands, with higher awards in exceptional cases); the Presidents of the Employment Tribunals update the band amounts each April
- Personal injury – if psychiatric injury is caused
- Aggravated damages – in exceptional cases
Settlement
Most employment tribunal claims are settled before reaching a final hearing. Settlement can occur at any stage:
- During ACAS Early Conciliation (before a claim is filed)
- After the claim is filed but before the hearing, through negotiation or judicial mediation
- At the door of the tribunal on the day of the hearing
Settlement is normally recorded in a COT3 (an ACAS-brokered settlement) or a settlement agreement (a legally binding agreement where the employee receives independent legal advice). Settlement agreements are commonly used alongside notice period arrangements.
A settlement agreement must be in writing, relate to the particular complaint, confirm that the employee has received independent legal advice from a qualified adviser with professional indemnity insurance, and state that the statutory conditions are satisfied.
How to reduce tribunal risk
Before disputes arise
- Use written employment contracts – ensure every employee has a compliant statement of employment particulars from day one
- Follow fair procedures – use ACAS Code of Practice-compliant disciplinary and grievance procedures
- Document everything – keep records of performance reviews, warnings, meetings and decisions
- Train managers – ensure line managers understand employment law basics, particularly around dismissal, discrimination and flexible working
- Take legal advice early – consult a solicitor before dismissing an employee, especially in complex or sensitive cases
When a claim is received
- Respond within 28 days – missing the ET3 deadline can result in a default judgment
- Preserve documents – put a litigation hold in place to prevent relevant documents from being deleted or destroyed
- Assess the merits – take an honest view of the strength of the employer’s position and the realistic range of compensation
- Consider settlement – weigh the cost and management time of defending the claim against the cost of a reasonable settlement
- Prepare thoroughly – if the claim proceeds to a hearing, invest in clear witness statements, a well-organised bundle and professional representation