'Small businesses exposed to legal risk'
Mar 05 2008
More employees are taking their employers to tribunal than ever before, leaving uninsured small businesses open to financial ruin, according to a new report.
The annual Hiscox Risk Barometer has shown that 62 per cent of employers do not have employment practices liability insurance, which would protect them from claims such as sexual discrimination or unfair dismissal.
Government statistics show there were approaching 133,000 employment tribunals last year, up 15 per cent on the previous year.
Hiscox UK's director of business insurance Gary Head claims a lot of small firms were covered for fire or flood in their office buildings but not for financing a claim made against them by an employee.
Some small business owners rely on their company's 'family atmosphere' to protect them, says Head.
'By failing to take out appropriate cover they're leaving themselves hugely exposed to lengthy and expensive legal action and significant reputational damage,' he adds.
In contrast, 77 per cent of employers are insured against personal injury to their employees and 81 per cent against damage to office contents and computer equipment.
Workers do not have to pay to bring a case to an employment tribunal and compensation for discrimination or dismissal on health and safety grounds is uncapped. For unfair dismissal, awards depend on the employees' age and length of service.