Small and medium-sized enterprises and mediation – what's the problem

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Emma McLean: Welcome to the Acas Podcast. I'm Emma McLean, operations manager at Acas, and in this episode, I'm joined by Martin McTague, chair of the Federation of Small Businesses.

We'll be discussing the benefits of mediation, the barriers that small businesses face when trying to access mediation services or when training in-house mediators and how Acas and the Federation of Small Businesses can support you.

You will find out more information about services and support in the program notes, but for now, please enjoy the conversation and feel free to share with anyone you think would benefit from listening.

Okay, so Martin, you and I are lucky enough to be able to talk together today about mediation and the impact that mediation can have on particularly small businesses.

I guess that's something that you're very familiar with, Martin, but have experience in knowing that not all small businesses are aware of and access mediation. Is that something that you'd agree with?

Martin McTague: Yeah, no, that's true. I mean, the best place to start is to say that, you know, as far as small businesses are concerned, probably one of the most stressful decisions they ever make is employing people. They get themselves in a very difficult position thinking about how that could impact their choices in the future. And one of the biggest fears they have, and it can be disproportionate, is the fear of employment tribunals.

They generally don't have any HR support, so they feel that if they're going to make a mistake, this thing's going to inevitably end up in an employment tribunal. That makes the fear of that very stressful, and the fear of employing people very stressful.

And I think even those people who are not close to this have realised that there's a real backlog of cases now. So, not only are they fearful that this thing could end up being very expensive, but they're also fearful that it could drag on for a hell of a long time before they get resolved, you know, and typically you're talking about 12 months.

But I think when people talk about mediation, the biggest thing that holds them back is that, this fear of, they may make a legal mistake, they may say something in a mediation process that ends up costing them or becoming an issue that they can't resolve. So, I think most people will avoid mediation, not because they think it's on its own, you know, on its own strengths, a good thing or a bad thing. It's just that they're not sure about the legal implications.

Emma: That's obviously really important, isn't it? And, you know, so what you say in there is that driven by fear, fear of the cost, fear of the implications. But actually, we know that not having processes and procedures – and you might not have a HR function as a small business – but, certainly staff and managers, directors, business owners who are trained and skilled in identifying conflict disputes and being able to handle those effectively, I guess, are really important to your members. And there's lots of things they can do in terms of training – Acas provides that service.

If I can just talk to you about your members and just share some research that Acas has in terms of dealing with a dispute internally, and when it becomes, maybe, not resolved, and the cost of that.

So, we know from our research, that if an individual raises an issue with a manager, and they're allowed or they have the option to maybe have a meeting with their manager, maybe, HR involved, if they have that function, trade union representatives, that would cost the business less than £200.

If an employer decides to use workplace mediation, generally, that would cost them less than £1,800. So, to successfully resolve that kind of dispute, they're looking at around less than £2,000. And that means that all of those discussions are generally without prejudice, so they're able to explore and share the issues and try to find a solution. And as I say, they're in control of the solution. And whilst I understand what you're saying and fully appreciate that, they're scared to step into that arena because of the reasons you've explained.

If we look at the cost of when a dispute does escalate, so somebody doesn't raise the issue with an employer, there's a negative impact on that person's wellbeing. They might be in work but not really delivering in the way that they would normally, or they might be off and they might leave that organisation. The total cost there is under £32,000.

And so, you know, I think hopefully, members will think about using early conflict resolution instead of avoiding it and allowing it to grow legs and arms and continue down a conciliation route, which is where there's a right to make an employment tribunal claim. And our services do include conciliation. You know, we help employers and employees to resolve these disputes, free at the point of use, and again, it's without prejudice.

So, if a dispute doesn't resolve, a person can make a potential tribunal claim. So can an employer. That's not just employee driven discussions about resolving the dispute before it escalates. So, they're both tools that we can use to resolve disputes. Mediation comes in before that to try and repair that relationship.

Martin: Yeah, I mean, one way of framing this is that there are five and a half million small businesses in the UK, and roughly half of them employ less than 10 people.

For most small businesses in the UK, the relationship is a bit like a sort of extended family. And although you and I both recognise that Acas are entirely neutral in this situation, right, and they're trying to help resolve a dispute between 2 parties. I think there is a widespread perception that that isn't the case, that Acas are there simply to represent the interests of the employee. Now, you know, we can argue about why that has taken hold, that view, but it is widespread, right? So, then what people then feel is they get into a very defensive mode, where they think what they've got to do is go and get, you know, lawyered-up. They've got to get legal advice. That's where the costs start to accelerate for a small business. Because instead of resolving the issue, you know, on a one person to one person basis, with the help of a mediator, they're getting into a defensive mode where they're thinking that they've got to go out and lawyer-up.

Now I think half the problem is they don't know where the line is. They don't know if they cross the particular line, would they end up getting themselves into a more expensive dispute, or if they, you know, where that line is, is a problem for them. So, what they end up doing is playing safe and avoiding any kind of formal mediation or any kind of process with Acas to try and resolve it.

Now, I know that's not a good idea, but you know, it's not a question about what we understand as good or bad. It's about trying to get a better understanding for a large group of companies and a large group, you know, something like 60% of the private sector workforce work for small companies. So, you're not talking about a small number of people. You're talking about a very large number of people affected by this.

Emma: Yeah, and I think that's a point that, I guess, we at Acas and yourselves the Federation of Small Businesses need to work together on to educate employers and everybody, that Acas – that our strap line is working for everybody and we do, all of our staff. We are impartial.

We're there to make work and life better for everybody and provide assistance. And we do have people that say, Acas are a union, and you join them, and we're absolutely not a union. We're a non-departmental public body, and we're there to make work and life better for everybody. And mediation is available, not just through Acas. You know, there are other people that provide mediation, but absolutely mediators and conciliators are there and we exist.

One of the aims is to prevent disputes from escalating. And so we don't act in the interest of anybody. We act in the interest of Acas in achieving the aim of resolving disputes. So, employers can be assured that when you know they are accepting our services and talking to us. We are impartial, and we're there to signpost, sometimes to legal advice, because that's important sometimes, but absolutely to explore. When we're talking about mediation, it's about exploring and resolving the dispute, the same as conciliation as well. And I know that some small businesses use our employer-led conciliation service. And that tells us that we know that they can come to us and that they know that they can, you know, let us know about a dispute, and we're then there to facilitate a discussion about resolving that dispute with a legally binding agreement. Mediation doesn't result in a legally binding agreement. The discussion stays between the parties, and that's the result.

Martin: Yeah, no, I entirely agree with you, Emma. It's just that I think there are still a lot of people who don't fully understand that process and are not clued into the niceties of HR and how they can resolve issues quickly and cheaply, and there is an inevitability about going on to the, you know, an industrial tribunal or employment tribunal.

So, the way we've tackled it, is not trying to sort of knock down people's preconceptions, but to say, look, if you're worried about, where's the legal line and where will you step over that legal line? We provide members with a 24/7 legal helpline, and that legal helpline will encourage people to go for mediation if, you know, they think it's appropriate. But the important thing is they will guide a small business owner so that small business owner feels that they're not entirely on their own, that they've got the backup of this.

Now I also think that in many cases, when people are worried about making mistakes, they're worried about the financial implications of that mistake. So, we also provide insurance so that if people do in the end, end up incurring costs through a dispute resolution process, they will have those costs covered. Now, that is a really popular service, but nobody is suggesting that that is an alternative to mediation. It's complementary to mediation. But I think it's worth recognising that people in a small business environment, running a small team, are unsure of their position and need to feel they've got somebody in their corner, giving them a little bit of guidance.

Emma: Absolutely. So, we can see, when we've spoken about obviously, small business owners are reluctant sometimes to use conflict resolution, and then they then go in too formal, too fast, because they are in fear of litigation, but actually resolving early, close to the source and with minimal external input, will be better for them, better for their employers, that their employees, and better for the for the organisation, better for growth, okay.

What evidence do you think small business owners need to make more informed choices about how they handle conflict? What would help to build that confidence?

Martin: Well, I'm going to say the inevitable, in a way, if they're members of the Federation of Small Businesses, which is the largest business organisation in the UK, they already know this is important. But what we're going to try and do is give lots of employers, who don't have confidence in the system. We're trying to give them more confidence that this is a sensible route. That's the reason I'm participating in this. That's why I sit on the Acas Council. Because what we're trying to do is give small employers the same kind of skills and advice that very large companies have. You know, a very large company will generally have a big, elaborate HR function, which means that directors of that company are unlikely to make the kind of mistakes and are less fearful of this.

I think in many ways, if you're talking about mediation, the largest number of early-stage disputes that you could head off are likely to be in small companies.

Emma: So, how do you think that we can, in partnership with the Federation of Small Businesses, and obviously, other sectors and regional businesses, representative bodies, sort of share the evidence and spread the word? What types of things could we offer, do you think?

Martin: Well, this podcast is a good start, isn't it, you know, and we could do more of this kind of thing. I think there is, I think we've collectively got to try and remove this idea that in some way, Acas is an employee-focused organisation, but that's not trying to deny people the feeling that they've got to have somebody that's on their side. I mean, you could imagine in disputes in big companies, many employees still want their trade unions representing them, don't they?

And I don't think it's unreasonable in these situations for people to feel on the employer-side that they've got somebody who's looking out for them and is watching them. You know, what would be in their best interest.

So, I think if you get to a situation where you're encouraging mediation at an early stage, and you've got legal support and the backup that we're providing, it's a win-win. They're in entirely the best position. And really, you know, yeah, the Federation of Small Businesses membership costs them about £200 a year. The kind of numbers that you're talking about are dwarfed within, you know, within a minute with these kinds of disputes.

Emma: and Acas don't discriminate between the types of service that we offer because of the size of businesses. You know those resources are available. We have online resources, fact sheets, toolkits on the website that give, you know, advice on how and what steps employers can follow. We have webinars and online training. We do offer advisory services as well, where our senior advisers will work with businesses to educate and put into practice policies and procedures to allow them to manage their own HR functions, if or alongside the HR function, I guess publications and our newsletters and things are really important. Things like you said, there are these podcasts.

There's lots of ways, I guess, that we can reach employers, small and large, but this is about reaching the smaller employers to understand that they can access Acas, that we are there to support them. We are independent. We don't give legal advice in the way a solicitor might, but you know, we have our helpline, but absolutely, you know, if employers can consider that a mindset of solving disputes before they happen or before they escalate, then that will help to address and identify conflict before it escalates.

Martin: I agree with you completely, Emma, and you know that the whole point of this exercise is to make sure that's more widely understood and that you're trying to remove this reputation that Acas have had, which I think is unfair, that they are entirely, you know, on the side of the employee. But this is ingrained, right? So, it's not going to change overnight. It's an ingrained perception. And I think it's also reasonable that if they feel they're going to make some kind of mistake in this process, they've got somebody who can provide them with that legal support?

Emma: Yeah, absolutely. And I think, you know, it's accepted if people's employers make mistakes, don't they? Everybody makes mistakes. It's about having access to resources that allow them to identify, well, where is the mistake and what are the pitfalls? And you know, you said, the Federation of Small Businesses provides the helpline. Acas provides the helpline. And we have a wealth of resources that you can identify from our website and from talking to our people about the tools to deploy those methods.

Martin: It's strange, you know, there's a lot of talk about employment rights at the moment, you know, and changing those employment rights. Now that's just adding to that fear factor that people have. Now, if we're going to grow our economy, and people are not going to feel frightened about taking on new employees, then these are absolutely vital that you are able to show small business owners that you can employ somebody with confidence and you're not going to get into a sort of quagmire of difficult relationships and potential legal challenges that might end up in an employment tribunal and cost you tens of thousands of pounds. That message has to go out loud and clear. There are plenty of ways of avoiding that.

Emma: Absolutely. You spoke about your helpline. How do you think the Federation of Small Businesses can help people understand, again, the message that Acas work for everybody, and that there are lots of ways that they can put processes in place and manage people, and, notably, manage conflict.

What do you think the Federation of Small Businesses can do?

Martin: I think the simple way is when people call the helpline that they get that advice at an early stage. Have you considered mediation? Have you considered early reconciliation, early conciliation, rather. You know, these are processes that I think most people, most small employers, are not aware of, right? They imagine that when a problem happens in the workplace, there's an inevitable track towards an employment tribunal, and that there's no way of getting off it, right?

So, you know, introducing an environment where the employer feels safe, they're getting advised by a legally qualified solicitor on a legal helpline, then I think that gives them confidence. So, I think if you're going to do it in a way which has the maximum impact, you do it by; when they ring that helpline, they get this kind of advice, and they get it early on.

Emma: Yeah, from a trusted source and as well, it's about, I guess, signposting them, isn't it, to grow them tailored solutions as well. You know, they might be in this quagmire of, "Oh, I'm down this road and I don't know where to go, and the only way I see is this, you know, conflict resolution", and conflict resolution is hugely important, but I guess it's about encouraging members and employers of all sizes, to really think about whether or not they've got a HR function. How are they trained to manage situations? So, manage absenteeism, maybe manage behaviours, and have difficult conversations with people. Absolutely Acas are there to provide those kinds of services?

Martin: To be fair, the average small business owner knows they've got lots of shortcomings, right? They're not experts in the whole range of things they have to do. You know, they may not be an expert on finance, they may not be the world's best salesman, they may be a great engineer, and they can't. You know, these things, like being HR, finance, sales and marketing could all be very alien to them. They don't need another one to add to the list of things they're not very good at. What they need is help. They need people they trust to provide help. And I think you know between us, we can do that.

Emma: Absolutely. So, that's a great analogy, isn't it? You're this brilliant engineer, you've got this great business, and it's growing, and you're recruiting people, and you don't want to become an expert in HR. But you want to be able to access support resources, processes that lighten the load, that means that, you know, you're a productive, profitable organisation.

Martin: Yeah, and you know, just like, because the dynamics are very much like a family, right? Imagine 10 people, you know, this isn't that unusual for a family. Families fall out on a regular basis, don't they? This isn't unusual. This is human relations. And so you've got to find a way in this kind of environment in which you can manage that process, rather than having a sort of recipe for despair that will stop people recruiting. We've got to get the message out that there are ways, you know, there are plenty of ways we can manage this better.

Emma: Absolutely. And I think, I think anyone, any mediator, who is trained in mediation and delivers mediation, will tell you that regardless of the size of the dispute, they will be part of a family or a friendship group. Those skills transfer not only into conducting a mediation, but when they're interacting with their family or their small friendship group. So, I think managers, directors, business owners, becoming skilled in having those conversations is key and critical.

Martin: Yeah, these are really important life skills, aren't they? You know, you're not going to just use them in purely a work environment. So, you know, I think there's lots to be said for this, and we're on the same side.

Emma: Okay, well, thank you, Martin.

It's been a pleasure to speak to you today and really insightful and educational looking particularly at the needs of small businesses. I think our key takeaways are that you find that a lot of your small businesses don't understand that Acas are here to support them, and that we are a source of advice, a source of resolving disputes early, a way of up-skilling themselves and their staff. And that we both understand that the cost of conflict is huge to both small and large employers. That resolving disputes early with mediation, conversations with accessing mediation externally or having your own internal resources are key to litigation, which can be expensive, costly and negative.

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