UK Businesses Grapple with Rising Litigation Concerns

A recent study conducted by global risk management and insurance broker, Gallagher, has shed light on the escalating levels of litigation faced by UK businesses, raising concerns among senior leaders about the potential impact on their operations and financial health.

Litigation on the rise

Litigation on the rise

Key Findings

  • Seven in ten (71%) senior leaders from large UK businesses expressed worry about the impact of rising litigation on their trading.
  • Nearly three-quarters (72%) of the surveyed firms reported an increase in litigation over the past five years, with 60% anticipating a further surge in cases over the next 12 months.
  • The surge in litigation is fuelled by various factors, including the escalating cost of living (47%), economic instability (36%), and an increasingly litigious society (35%).
  • Since 2019, more than two in five (43%) UK businesses have faced legal threats, with many experiencing multiple occurrences.
  • Alarmingly, more than a quarter (28%) of respondents stated that litigation cases have surged by over 40% in the past five years.

Common Legal Issues

  • Employee disputes (38%), contractual disagreements (35%), and financial conflicts (34%) were identified as the most common legal issues faced by UK businesses.
  • Mid-sized companies with 501 to 1000 employees were the most vulnerable, with over half (55%) reporting legal threats.
  • Even smaller businesses, lacking in-house legal expertise, were not spared, with almost two in five (38%) stating they had been subjected to legal action.
  • Employee litigation emerged as a particularly pressing concern, with individual cases costing businesses substantial amounts, reaching hundreds of thousands or even millions of pounds in some instances.

Preparedness and Impact

  • Nearly a fifth (19%) of senior UK business leaders admitted feeling unprepared to handle accusations or claims of unlawful behaviour against their companies.
  • The impact of litigation extends beyond financial repercussions, with respondents citing reputational damage (65%), operational disruptions (63%), management time constraints (63%), and strategic setbacks (62%) as significant consequences.
  • A majority (58%) also reported a substantial financial impact on their firms.

Sector Variations and Risk Management

  • Industries such as energy, scientific operations, IT, and finance faced higher-than-average rates of legal disputes.
  • Gary Fletcher, Managing Director of the South at Gallagher UK & Ireland, warned of the significant risk that litigation poses to the operational and financial health of UK businesses, particularly within vital service sectors.
  • Experts advise companies to prioritise risk management strategies and consider legal expenses insurance to mitigate potential financial burdens associated with legal disputes.

As litigation continues to pose a growing threat to businesses across the UK, proactive risk management and appropriate insurance coverage are becoming increasingly crucial for companies to safeguard their operations and financial stability.

The role of HR

HR plays a crucial role in preventing employee litigation by implementing proactive measures and fostering a positive work environment. Here are some key strategies we at Tick HR Solutions adopt:

Comprehensive Documentation

Maintaining thorough and accurate documentation of employee records, performance evaluations, disciplinary actions, and workplace incidents are essential. Proper documentation provides a solid defence against potential lawsuits and demonstrates fair and consistent treatment of employees.

Compliance with Employment Laws

We stay up to date with ever-changing employment laws and regulations. Ensuring compliance with laws related to hiring, compensation, workplace safety, discrimination, and harassment can help mitigate legal risks.

Effective Training and Communication

We offer training sessions for managers and employees on topics such as anti-discrimination, anti-harassment, and workplace policies which help prevent unlawful behaviour and promote a respectful work culture. Clear communication of company policies and procedures through employee handbooks and regular updates are crucial.

Prompt Complaint Resolution

We help establish and follow a well-defined process for addressing employee complaints and grievances promptly and fairly. Addressing issues early and providing a safe channel for employees to voice concerns can prevent escalation to legal action.

Consistent Policy Implementation

We ensure that company policies and procedures are consistently applied across all levels of the organisation. Inconsistent or selective enforcement can lead to perceptions of unfair treatment and increase the risk of litigation.

By prioritising these strategies, Tick HR can play a vital role in mitigating legal risks, fostering a positive work environment, and protecting the organisation from costly employee litigation.

Like to find out more?  Contact us today.

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