According to BIS, in a survey taken in 2013 one third of awards made by tribunals were unpaid, and only half of successful claimant's were paid without having to take enforcement action. A new part 2A of the Employment Tribunals Act 1996 plans to address this by introducing a scheme under which employers will be subject to a financial penalty if they fail to pay tribunal awards or COT3 settlement sums.
A warning notice will be issued by an enforcement officer stating that unless the sum due is paid within 28 days a financial penalty will be imposed. If the sum due is not paid within that 28 day period then a penalty notice will be issued which will require the employer to pay a financial penalty equivalent to 50% of the original award to the Secretary of State. This amount will be subject to a minimum of £100 and a maximum of £5,000. If the employer, within 14 days, then pays both the original award to the claimant and the financial penalty to the Secretary of State, the financial penalty is reduced by 50%.
The aim of the scheme is to deter non payment of awards, however it is unlikely to provide a complete remedy. The BIS survey identified the main reason for awards not being paid as being financial difficulties with 25% of awards remaining unpaid because of the insolvency of the respondent. This survey also identified that it was mainly smaller employers who did not pay awards, with over 80% of larger employers (with 250 employees or more) paying without the need for any enforcement action. It remains to be seen how effective the new scheme will be in these circumstances.
