Thu 25 Feb 2016

Penalties for unpaid awards and settlements

With effect from April 2016 financial penalties can be imposed on employers who do not pay tribunal awards or who fail to pay settlements agreed under COT3 settlement forms.

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.

Make an Enquiry

From our offices we serve the whole of Scotland, as well as clients around the world with interests in Scotland. Please complete the form below, and a member of our team will be in touch shortly.

Morton Fraser MacRoberts LLP will use the information you provide to contact you about your inquiry. The information is confidential. For more information on our privacy practices please see our Privacy Notice