Facing an employment tribunal can be costly, not just financially, but in terms of time, reputation, and disruption to your business. Understanding the potential costs upfront can help you make informed decisions about how to respond to claims and manage risk.
This article will help you understand the true cost of defending an Employment Tribunal claim, from legal expenses and lost productivity to reputational damage. We’ll walk you through the financial and practical implications, offer guidance on how costs can be managed, and explain what to expect if a claim goes all the way to a final hearing.
If you want early, practical advice to help minimise legal risk and avoid escalating disputes, our employment law solicitors for businesses are here to help.
Contents:
How much are Employment Tribunal costs?
There are a number of costs involved with defending an Employment Tribunal Claim, some of which are easy to calculate and others which have a less obvious initial financial cost but will likely have a negative impact on your business.
Whilst there are no longer Employment Tribunal fees to submit or respond to an Employment Tribunal Claim, there may be other fees related to defending a Claim. Depending on the nature and complexity of the Claim, an expert witness for your business may need to be appointed. For example, a medical professional’s opinion might be helpful for disability discrimination claim. The fees for an expert witness to prepare a report and attend the Tribunal hearing, if necessary, will be payable by your business upfront and are unlikely to be recoverable even if you successfully defend the claim..
The highest financial cost of defending an Employment Tribunal Claim is likely to be legal fees paid to a solicitor for helping to prepare the Response to the Claim and to prepare documents and represent your business at the Employment Tribunal. You can generally expect that the solicitor's fees will be upwards of £10,000 dependent on the complexity of the case and length of hearing. Find out more about our competitive fees for employment tribunal cases. There are also likely to be other legal fees if it is necessary to instruct a barrister where a specialist opinion is needed or for advocacy at the final hearing and sometimes at a preliminary hearing.
Solicitors are required by the Solicitors Regulation Authority to provide costs information for the provision of advice and representation to employers in relation to defending claims in the Employment Tribunal brought by an employee for unfair dismissal or wrongful dismissal. Particularly when responding to those types of Claim it should be clear what your legal costs will be from the outset.
There are also other hidden financial costs when defending an Employment Tribunal claim as the time involved in preparing your defence can be significant, even when legally represented. This can include collating documents, gathering evidence, corresponding with advisers, preparing witness statements and attending hearings. This all distracts from running your core business and may harm your business’ productivity and profitability, it may also lead to poor morale for those involved in additional work defending your business. Additionally, there is a risk that if your business is unsuccessful in defending an Employment Tribunal claim, there may be reputational damage or risk of further claims being brought by other disgruntled employees. The press and public are usually allowed to attend tribunal hearings, and to listen to the evidence and outcome and Employment Tribunal judgments are published on the internet.
In terms of the employee’s costs, in employment claims each side tends to bear its own costs and do not generally "follow the event". The Employment Tribunal will not usually make an order that the losing party pays the winning party's costs as is often the case in civil court litigation.
However, it is possible to be liable for the other side’s costs in an employment tribunal case. An Employment Tribunal must consider whether to make a costs or preparation time order if a party, or their representative, has acted vexatiously, abusively, disruptively, or otherwise unreasonably in the bringing or conducting of the proceedings, or if any Claim made had no reasonable prospects of success. It is also possible for an Employment Tribunal to make a costs order if a party has been in breach of any order or practice direction or if a hearing has been postponed or adjourned on the application of a party.
In addition, where a witness has attended, or been ordered to attend, to give oral evidence at a hearing, an Employment Tribunal may make a costs order in respect of the expenses incurred in connection with their attendance. If an employee is unrepresented and has not had access to legal advice, it is less likely that a costs order will be made against them.
What compensation can an employer expect to pay out?
In addition to the above costs, if the employee is successful in their Employment Tribunal Claim, an Employment Tribunal will usually award compensation. The level of compensation will depend on the type(s) of Claim(s) that your employee brings. In the case of a successful unfair dismissal claim, a basic award and compensatory award will usually be made. A basic award is a fixed sum, calculated to a statutory formula using the claimant’s age, length of service and salary. A compensatory award is to compensate the employee for money they’ve lost as a result of being dismissed, including loss of earnings.
As of April 2025, the basic award is capped at £21,570 while the compensatory award is capped at £118,223 or 52 weeks’ gross pay, whichever is lower. However, in claims involving whistleblowing or health and safety dismissals, there is no cap on the compensatory award. Breach of contract claims are capped at £25,000, but in the case of discrimination, compensation can be significantly higher as it is uncapped and so it’s worth taking advice from an expert employment lawyer at an early stage as to what the likely financial liability for your business is.
Can Employment Tribunal costs be reduced or avoided?
In the absence of being able to avoid an Employment Tribunal Claim altogether, it is advisable to engage fully in the ACAS Early Conciliation process, where appropriate, to explore any potential options for settlement before the claim proceeds to a full hearing. If you can settle at an early stage, this is often the most cost-effective solution to avoid uncertainty and could save your business time and money that would otherwise be spent continuing to defend the Employment Tribunal claim all the way to final hearing.
An ACASCOT3 agreement or settlement agreement will also have the benefit of there being no ongoing financial liability for your business, as the employee will be precluded from bringing future employment claims against your business and will usually be conditional on the parties keeping the terms of settlement confidential You can find further information about settlement agreements here or our specialist employment lawyers can further advise you.
If your solicitor is acting on an hourly rate basis, keeping well appraised of fees on a regular basis and being organised when sending documents and taking time to collect evidence and draft accurate, comprehensive, factual statements to save solicitor time, are good ways to reduce legal fees.
Do Employment Tribunals favour employees?
While it might seem that Employment Tribunals favour employees, the reality is more nuanced. According to the Ministry of Justice, the Tribunal statistics for 2023/24 reported that there were 650 claims where compensation was awarded for unfair dismissal, with an average award of £14,000. However, it's important to note that the majority of claims do not proceed to a full hearing. Data from ACAS indicates that between October and December 2024, approximately 79% of employment tribunal cases were resolved without a hearing, either through settlements facilitated by ACAS or by being withdrawn.
These figures suggest that while employees may appear to have an advantage in tribunal outcomes, many cases are settled or withdrawn before reaching a hearing, often due to the strength of the evidence or the merits of the case. You can mitigate risks by ensuring fair and consistent disciplinary procedures and by seeking early legal advice when disputes arise.
Will the Employment Rights Bill result in more employees bringing Employment Tribunal claims?
It is likely that as a result of some new employee rights, Employers will be faced with more workplace disputes that could lead to claims being made by employees. A number of measures in the Bill including ‘Day 1’ rights to bring unfair dismissal claims, rights to guaranteed hours for workers and a ban on fire and rehire could result in more claims. In addition, the time limit for an employee to bring a claim in the tribunal will increase from 3 months to 6 months. There is also the introduction of the Fair Work Agency which will have statutory powers to bring claims on behalf of employees for unpaid sick pay and holiday pay.
Given that the UK employment tribunal backlog is already at record levels, the expected rise in cases will undoubtedly lead to more delays and increased costs for employers.
Summary
Defending an Employment Tribunal claim can be a costly exercise, but if this is unavoidable, seeking advice at an early stage is advisable. The likely legal costs, risk to reputation if a case is lost and cost of time spent to defend a claim to final hearing versus cost of settlement should be weighed up. Our employment law experts can assist with assessing your claim and likely costs defending or settling these. For further information about how we can assist you defend an Employment Tribunal Claim and about our extremely competitive rates using our subscriptions services, you can make contact with our employment law solicitors here.
