· Features

How can HR cut its legal costs with the number of employee grievances set to increase?

The continuing escalation of employee grievances, many of which lead to Employment Tribunal applications, has been well documented in the pages of HR journals recently. But whilst these employee complaints continue to rise, HR is expected to control associated costs. In many cases, however, external lawyers refuse to reduce charges, driving themselves out of a rapidly growing market.

The volume of legal work relating to employment has boomed, triggered by the impact of recession. In the year to March 31 2009 the number of unfair dismissal claims jumped 29% whilst the number of claims for failure to consult and inform in a redundancy process leapt 157%, according to latest statistics from the Employment Tribunal.

When this irresistible force of mounting Tribunal cases meets a tightly restricted legal budget, in the words of Ella Fitzgerald's song, "Something's gotta give, something's gotta give, something's gotta give"!

But what can give? For most employers, it cannot be the budget. As companies increasingly question whether their advisors provide real value for money, the legal profession is being forced to re-think its pricing models in order to stay competitive.

The principal desire of most employers is to handle employee grievances and Employment Tribunal applications with a minimum amount of fuss, exposure and cost to the business. To spend the money required to protect the company's interests - but no more.

Where Tribunal claims are viewed as low value disruptions to the business, they must be dealt with in the most cost efficient manner either by settling quickly and/or by reducing legal spend to a minimum. High risk, high value claims deserve different considerations but must be identified as such at an early stage.

Not every law firm has the flexibility to meet their clients' needs in this way. High overheads and a requirement that employment lawyers match the high profits of their corporate colleagues force some to protect their profit margins with high charge-out rates which simply cannot be justified on work viewed by the client as more of a nuisance value than a high business risk.

By focusing mainly on what they see as 'high value employment work', some of the larger law firms are now failing to compete in the lower end market. They now decline routine tribunal work or have delegated this type of work to the most junior and inexperienced members of their team, increasing the likelihood that a dissatisfied client will be lost.

As a result some employers have considered alternatives: insurance companies, HR consultancies or non-specialist lawyers, in their attempt to cut legal costs. The result, however, can also prove disappointing and even dangerous where service levels and over-all support are inadequate.  

Employers increasingly demand that their suppliers include in their services free help-line support, updates and newsletters, 'how to' guides, regular free training, fixed prices and budget certainty. Companies expect from their lawyers strategic input to help decide when to fight or settle and when mediation is appropriate. They expect objective comment and advice and not to feel under pressure from their lawyers to settle.  This can occur under fee agreements where the lawyers are awarded a disproportionate slice of their fee at the beginning of the case.  There may be little financial incentive to pursue the case to the later stages.

Fortunately, well resourced, well trained teams of employment lawyers, who offer a full range of service at reasonable cost, do exist. Their relatively smaller size, and decentralised offices using the latest technology means that they can undertake quality work whilst charging considerably less than their new clients have been charged in the past for similar services.

So, as demand for cost efficiency in employment continues to grow, law firms cannot afford to be immoveable. There will not be many employers prepared to budge.

Peter Thompson, solicitor and consultant at commercial law firm EMW Picton Howell