Flood of Equality Bill claims to hit underinsured SMEs

Since the Government’s Equality Bill’s draft was published last month it has attracted a string of criticisms. Experts have warned that the Bill, designed to simplify existing law tackling discrimination, will lead to a flood of claims made against UK employers.

This bill is just one more example of increased regulatory pressure being applied to the UK’s small businesses by the current Government. As the pressure mounts with more and more people chasing fewer jobs, common sense dictates that candidates who feel they have been turned down for a vacancy as a result of positive discrimination will be more likely to file a claim against their prospective employers.

For the many small businesses already facing increased pressure on their credit channels, the prospect of increased litigation and its associated costs is an eye-watering one. More worrying however is the fact that many firms who will be in the firing line for claims do not have the adequate insurance cover to protect them and could potentially be crippled by legal costs.

Recent research from Coverzones revealed that eight out of ten (80%) SMEs are facing greater insurance requirements due to increasing litigation and red tape, while more than a third (38 per cent) has been forced to cut their level of cover as a result of the current economic conditions. One in seven (13 per cent) claimed that they knowingly lack the adequate insurance cover for their business.

Unlike Employers Liability Insurance, businesses are not legally required to have Legal Expenses Insurance and the temptation for many has been to go without. This type of cover provides for the legal expenses that the policy holder may incur in employment disputes, as well as for any award of the other party’s legal costs – exactly the protection that SMEs facing claims will require.

The Government’s Equality Bill is designed to provide protection to prospective employees however, in doing so; it could well have the opposite effect on potential employers. According to BERR figures, SMEs account for 59.2 per cent of private sector employment and 51.5 per cent of private sector turnover. Any substantial increase in claims from prospective employees would inevitably hit the UK’s SME community harder than any other group.

You can view the SME Risk Management Report at http://www.coverzones.com/learn-more/news/sme-risk-report-2009/1106/