Embargoed until 00:01, 30 October 2026: UK businesses are facing a rise in workplace conflicts with almost two-thirds (63%) of complaints now resulting in attempted legal action, according to new research from leading risk management, insurance and consulting firm, Gallagher.
The research is released as significant changes under the Employment Rights Act 2025 take effect. From 1 October, the time limit for bringing most employment tribunal claims increased from three to six months. Further measures are due from 30 October, including requiring employers to take all reasonable steps to prevent sexual harassment and new obligations around third-party harassment. Further reforms are scheduled for 2027, including changes to unfair dismissal and flexible working rights.
“Employee disputes should not be viewed only as a HR issue - they are a significant operational and financial risk, consuming management time, driving legal costs and creating reputational exposure at a time when employers are already navigating a more complicated regulatory landscape.”
— Laura Parris, Executive Director of Management Liability, Gallagher
The data shows these changes are arriving at a time when workplace disputes are already becoming more frequent. Among employers that had dealt with an employee disagreement, 40% said flexible-working disagreements had become more frequent compared with two years ago, 37% said the same of bullying, harassment or discrimination disputes and 36% of sickness, absence or disability-related issues.
Workplace disputes carry a significant business cost
Gallagher’s study of 501 UK employers found the average dispute costs £2,500 to resolve, with legal costs potentially arising long before a case reaches an Employment Tribunal. Many employers will seek legal advice to navigate increasingly complex HR legislation and determine how best to respond. According to Government figures HR lawyers’ cost an average £388 per hour to provide advice, so it is easy to see how these costs can rack up.
The burden on management time is also significant. Almost six in ten (59%) employers said senior management, HR or legal teams had spent at least 25 hours dealing with employee disputes over the past two years.
For complaints that escalate the cost can increase quickly. Acas estimates that formal disciplinary and grievance procedures cost UK employers £2.36 billion annually. Where disputes escalate to an Employment Tribunal, separate Government analysis has estimated that defending a claim costs businesses £13,170 on average, including legal representation and management time.
These costs are being borne by businesses regardless of whether the complaints are found to be justified and, on average, firms’ face multiple complaints per year resulting in a significant impact on their finances. This rise is further evidenced by data from the Employment Tribunal which is currently facing a backlog of 70,000 claims due to the volume of complaints submitted.
The impact on firms’ reputation also gives cause for concern with more than two-thirds (68%) of employers that had experienced workplace disputes reporting an impact. These included negative social media comments (26%), negative reviews on sites such as Glassdoor or LinkedIn (26%), additional complaints from existing employees (24%) and former employees (22%), and negative press coverage (16%).
Bullying, harassment and discrimination allegations topped the list of workplace issues resulting in threatened legal action, cited by 24% of employers that had experienced workplace disputes.
Laura Parris, Executive Director of Management Liability at Gallagher said: “Employee disputes should not be viewed only as a HR issue - they are a significant operational and financial risk, consuming management time, driving legal costs and creating reputational exposure at a time when employers are already navigating a more complicated regulatory landscape. Based on our research, the average dispute can cost thousands of pounds to resolve, while disputes that escalate into legal action carry an even greater financial and organisational burden.”
Many businesses misunderstand which protection they need leaving them potentially exposed to significant costs
Many employers are not insured for costs relating to employee litigation because they mistakenly think it is covered under employers’ liability insurance, which is widely purchased as it is compulsory. A third (34%) of business owners incorrectly thought this insurance covers legal costs relating to employee grievances or disputes, a similar number (31%) thought it would pay out for employment tribunal claims and 27% selected settlement agreements with employees.
However, none of these costs would be covered as employers’ liability insurance is designed to cover claims where employees are injured or become ill as a result of their work. Businesses require employment practices liability insurance to cover them against costs arising from employment disputes.
With the majority of employers that had experienced workplace disputes reporting legal action, businesses should review whether their insurance arrangements reflect the risks they are facing in practice, including who would meet legal costs, settlements or awards if an employment issue escalates.
Laura added: “Standard employers’ liability cover is designed for work-related injury and illness, so employers should check whether they have appropriate protection for the legal costs and other costs that can arise from employment disputes.
“The Employment Tribunal claim window has already doubled, and further responsibilities come into force this month, so businesses have a clear reason to review their arrangements now and ensure they have appropriate insurance in place to cover any costs they face from claims. The unfortunate truth is that even model employers are facing attempted claims and even if they don’t succeed there can be a significant financial burden on the business.”
Turning to UK businesses’ ability to manage increasingly complex HR legislation, Alistair Dornan, Managing Director, Gallagher’s HR and Consulting Division said: “Workplace disputes divert valuable time and resources away from core business priorities. Employers that invest in clear policies, manager training and early intervention are likely to be better placed to prevent issues escalating into costly and time-consuming disputes. Investing in manager training is key to this, ensuring those on the frontline have the confidence and skills to navigate difficult conversations, resolve issues early and prevent disputes becoming costly legal battles.”
Notes to editors
The employer research surveyed 501 UK employers, including HR leaders, people directors, legal/compliance professionals and business decision-makers, excluding sole traders. Fieldwork was conducted between 27 August and 1 September 2026.
Employment Rights Act 2025: implementation timeline
- December 2025: The Act received Royal Assent, beginning a phased overhaul of UK employment rights.
- February 2026: Stronger protections against dismissal for taking industrial action came into force.
- April 2026: Statutory Sick Pay became payable from the first day of sickness absence, day-one rights to paternity and unpaid parental leave were introduced, and whistleblowing protections relating to sexual harassment were strengthened. The Fair Work Agency was also established.
- October 2026: The time limit for bringing most employment tribunal claims increased from three to six months, effective from 1 October.
- 30 October 2026: Employers will be required to take 'all reasonable steps' to prevent sexual harassment, alongside new protections against harassment by third parties.
- January 2027: The qualifying period for ordinary unfair dismissal claims will fall from two years to six months, compensation caps will be removed, and stronger restrictions on 'fire and rehire' practices will take effect.
- Throughout 2027: Further reforms are expected, including increased protection for pregnant employees and new mothers, changes to flexible working rights, restrictions on non-disclosure agreements in harassment and discrimination cases, and new rights relating to guaranteed working hours.
Implementation dates for forthcoming measures remain subject to change.
About Gallagher
Gallagher is the brand name of Arthur J. Gallagher & Co. (NYSE: AJG) — the global insurance broker, risk management services and consulting firm headquartered in Rolling Meadows, Illinois. Gallagher offers client service capabilities in more than 130 countries around the world through a network of correspondent brokers and consultants.
For further information, please visit www.ajg.com/uk
