Incidence

• The incidence of employment problems is low. The survey found that in the past year, businesses experienced 1.5 ERPS per 100 employees. The incidence rate of ERPs for the public sector organisations responding to the survey was 0.8 ERPs per 100 employees.
• Despite claims of rising numbers of ERPs, the research uncovered no evidence that the incidence of ERPs is increasing over time and some evidence of decreasing levels. However, given the snapshot nature of this research and the shortage of comparable previous research, this conclusion must be tentative.

Costs and Benefits

• The median direct cost of all ERPs in the survey of private sector employers, including those proceeding to litigation, was about $5000, of which $2800 represented payouts to employees. The remainder included legal representation/advice, investigation costs and any replacement staff used to cover for participants in the ERP.
• The total direct costs for all employers (that is multiplying the average costs found in the survey by the number of ERPs estimated for the whole economy) would be around $146 million for the 12 month period. This amounts to around 0.4% of private sector wages and salaries for the year.^[1] Adding in lost management and staff time and productivity during the course of the ERP would increase the total cost to employers of ERPs to $214 million (0.6% of private sector wages and salaries for the year).
• There was no evidence that the presence of no win no fee advocates has greatly changed the environment for ERPs other than by allowing some lower income employees to access personal grievance procedures.
• The lowest costs of ERPs arose where resolution took place entirely in-house with neither the employer nor the employees having representation. This was also the process most favoured by employers for resolving future problems and which produced the highest level of satisfaction for employers. Unsurprisingly, costs increased if problems progressed through the hierarchy of problems resolution methods (mediation, Employment Relations Authority, Employment Court).

Effective Problem Resolution

The most effective employers (those who had few employment relationship problems and dealt with them in cost effective ways) involved in this study shared several features:

• They set up policies and procedures to deal with the most common or damaging employment issues ahead of time. They made clear to their employees what the boundaries of acceptable conduct were.
• They sought to address potential issues before they led to major conflict.
• They focussed on the major issues of concern and maintained good faith relationships.
• They knew about the full range of resolution methods available and could choose among them according to circumstances.

Future Research

The research leading up to this report has focused on the economic costs to employers and the social costs to employees as these have been the main areas of concern for the respective groups. Given time and a sufficient budget, DOL could usefully:

• survey employees to develop a fuller understanding of the economic costs they face;
• carry out more intensive research into the qualitative impacts of ERPs on employers and other staff;
• investigate the differences in experiences for small businesses in more detail, including why ERPs may arise earlier for small employers; and
• repeat this research at three year intervals to understand the changing patterns of ERPs and resolution methods over time.

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