It’s seldom spoken aloud, but every HR professional and business leader understands it: once an employee hits two years of service, they become a greater statutory commitment. Not because the employee has changed but because their legal status has.
It's an uncomfortable truth in HR circles: when an employee reaches two years of service, the risk profile changes significantly. Not because the employee has changed — but because their legal protections have expanded considerably.
The stakes change quickly.
A low-performing employee can no longer be dismissed quietly. What begins as a minor disagreement can escalate into a formal grievance and then a legal dispute. One careless email, a missed procedural step, or a manager with poor documentation can lead to a five-figure payout and a public airing of your internal processes.
When that moment arrives — as it increasingly does — employers are confronted with a critical question:
“Do we fight, or do we settle the claim?”
Should You Fight OR Settle Employment Tribunal Claims?
On the surface, it looks like a legal decision. In practice, it’s almost always a commercial one. Even the most vigorous defence is meaningless if it costs £30,000 in irrecoverable legal fees, drags leadership into weeks of preparation, and leaves the wider team demoralised.
Conversely, a quick and pragmatic settlement can leave a bitter taste — particularly if the claim is weak and opportunistic. Worse still, paying to resolve the issue may set a dangerous precedent.
Why?
Because people talk.
Despite robustly drafted confidentiality clauses, word can still get around. And before long, your business risks gaining a reputation as one that pays to avoid conflict. It’s a perception that undermines authority and chips away at leadership credibility. That’s the hidden cost of settling purely for convenience: it might make commercial sense today, but it can destabilise your position tomorrow.
Why Settle Instead of Fighting an Employment Claim?
Because a discreet settlement is an investment in legal protection. You have control over both cost and narrative. You set the terms, cap your exposure, and avoid the spiralling fees that often accompany drawn-out disputes.
It also shields your leadership team from the grind of evidence collection, witness statements, and tribunal preparation, allowing them to stay focused on the business. Most importantly, it keeps your name out of public tribunal records and the press, where reputational damage can far outlast the dispute itself.
There’s also an emotional toll that’s often underestimated. Long-running claims cast a shadow over entire teams. Morale dips. People become guarded, cautious, and unsure of where they stand. If the claimant remains employed or maintains contact with colleagues, tension lingers. And even after they’ve gone, the threat of legal action hangs in the air.
Still, early settlement isn’t always the right answer. In some cases, it sends the wrong message entirely (see above). And, sometimes, a claim demands to be challenged when the integrity of a policy, the authority of leadership, or the ethical foundation of the organisation is at stake.
The trouble is, fighting has its own risks. Even the strongest cases can unravel. Not because the facts aren’t on your side, but because the evidence is thin, the process flawed, or the tribunal is sympathetic to the claimant.
It’s entirely possible to be right and still lose, because winning cases are all about optics and what you can prove.
How Do You Know When it’s Worth Digging In?
Start by interrogating your position with cold realism:
- Does the law actually support your case?
- Is the dismissal fair, lawful, and procedurally sound?
- Have you followed your policies — and can you prove it?
- Are your records robust? Are your witnesses credible? Is the timeline consistent?
- Is this an isolated case or part of a wider pattern?
Then look at the claim itself. Allegations involving discrimination, whistleblowing, or health-related concerns carry significantly greater risk not just legally, but also reputationally. These claims are complex, emotive, and highly scrutinised. Get them wrong, and the consequences are long-lasting.
Next, consider the claimant’s motives. Is this a matter of principle or positioning? Are they seeking vindication or a negotiated exit? The answer may not change your legal standing, but it should inform your commercial response.
Before any tribunal claim can be filed, claimants must go through ACAS Early Conciliation. Don’t treat this as a formality. It’s your first and best opportunity to test the waters, gather intelligence and, where appropriate, explore resolution on favourable terms, without prejudice.
And above all: seek legal advice early. Not when the tribunal paperwork arrives, but as soon as a claim is threatened. A sharp legal mind will pressure-test your assumptions, identify weak spots, preserve critical evidence, and prepare you for what’s ahead.
The Bottom Line
Not every claim is worth a fight. Not every settlement is a surrender.
Sometimes, spending £5,000 to resolve a nuisance claim is smarter than spending £30,000 to win, especially if all you walk away with is a pyrrhic victory and a depleted budget.
The worst position to be in is litigating a claim you always knew you should have settled. You’ll find yourself wondering why you didn’t when the ACAS notification first landed — or better yet, before it ever did.
Offering a settlement is not a sign of weakness, but like any transaction, it comes down to return on investment. So be forensic, commercial, and brutally honest about your litigation appetite.
A tribunal won’t care how hard your year has been, how difficult the employee was, or how understaffed your HR team is. They care about three things: process, evidence, and credibility.
Always.
If there’s one lesson to take away from this article, it’s this:
Everything you do is a performance - it’s all for a tribunal panel who may not even know your business exists… until they do.
And by then, it’s too late.
You can’t turn back the clock. You’ll have to answer for it all. So, get it right before it lands in front of them. And if you know you can’t — consider settlement
At its core, deciding whether to fight or settle isn’t just about resolving a dispute. It’s a measure of your leadership, what you are prepared to tolerate and what you’re not.
Whatever you choose, make sure the decision reflects the organisation you’re trying to build. Because in employment litigation, how you act under pressure doesn’t just define your case.
It defines your culture.
