What Compensation could a Claimant Receive for Unfair Dismissal?

Each year, the employment tribunal compensation amount increases, to account for inflation. Therefore, these compensation limits and minimum statutory pay amounts will further increase from 6th April 2018.

In addition, this compensation is payable under Order 2018 SI/2018/194 of the Employment Rights (Increase of Limits). Having said this, these new rates will be effective in accordance with the appropriate date for the cause of action.

For example, if the date of termination for an employment tribunal claim falls on or after 6 April 2018, the newer compensation limits will be in effect.

Similarly, in cases wherein the date falls before 6 April 2018, the old compensation rates limits will apply, irrespective of the date when the compensation is actually awarded. This means that for employers, any successful unfair dismissal claim will cost more from now on.

Compensation Award Increases from April 2018

Starting April 2018, the statutory upper cap for the compensatory amount for unfair dismissal will increase from £80,541 to £83,682 or the gross salary for one year, whichever is lowest.

Furthermore, the statutory redundancy payments and the week’s pay for calculating the basic compensation amount for unfair dismissal will increase from £489 to £508.

While the guarantee pay increases from £27 to £28 per day, the minimum basic amount (in cases where a wrongful dismissal occurs, by the virtue of trade union, health, and safety, occupational pension trustee or employee representative reasons) will increase from £5,970 to £6,203.

Basic Award

As per employment law, the basic award is the statutory amount, which involves multiplying the relevant factors of your age, the length of continuous service (it can extend up to 20 years), and a week’s pay (at the date of effective termination.) Accordingly, the week’s pay is selected as follows:

  • half a week’s pay for each year of employment under the age of 22;
  • one week’s pay for each year of employment between ages 22 and 40;
  • one and a half weeks’ pay for each year of employment after age 41.

Furthermore, the weekly pay that is usually used to calculate the redundancy payment, is the normal weekly gross pay at the time an employee was dismissed (up to a maximum of £508.)

Having said this, the maximum basic award that can be compensated to an individual is £15,240. An employment tribunal, however, may reduce the basic award, if it finds that your conduct prior dismissal was such that it would be fair to reduce the basic award.

In addition, if you have been dismissed due to redundancy, the employment tribunal may reduce the basic award by an amount equal to the redundancy payment earlier received by you. If, however, the employer is not able to prove that the main reason for dismissal was redundancy, the tribunal makes no such deduction.

Compensatory Award

After establishing the basic award, the employment tribunal focuses on finalising the compensatory award. According to employment law, the compensatory amount is the one that is deemed equitable and just by the tribunal, in accordance with the circumstances relating to the loss suffered by the complainant due to wrongful dismissal.

Having said this, the losses should be due to a consequence of the unfair dismissal at the hands of your employer, and therefore, may include:

  • loss of wages;
  • loss of future wages;
  • loss of statutory rights;
  • loss of pension.

If we talk about wages, the compensatory awards may include contractual benefits like a company car and health insurance, along with some non-contractual benefits. You may also make a claim for your loss of commission or bonus.

However, you must give credit on your notice period, while assessing your damages and earnings. Having said this, assessing any future losses will always be a speculative process for the employment tribunal and may depend on the fact whether you have managed to find another job prior to the hearing date and mitigate the loss.

Here, the tribunal requires you to identify an appropriate cap for the compensation, in case you don’t have any new employment.

Unfair Dismissal Compensation Award

Presently, the maximum compensation amount that you may receive from the employment tribunal has increased from £80,541 to £83,682, starting April 2018.

Having said this, you need to leave out account benefits in kind, discretionary bonuses or pension contributions, while calculating the annual salary.

Assuming the unfair dismissal claim is successful, the employment tribunal will assess your total loss, and therefore, he or she will have to give credit for any amount already received from their employer as compensation (these may include enhanced redundancy payments or pay in lieu of notice.)

In case, you already have accepted a significantly large severance amount, you will need to carefully consider whether you want to go with an unfair dismissal claim.

This, however, does not mean you cannot achieve a settlement amount above the compensation cap through negotiation.

Furthermore, in cases that include constructive dismissal, whistleblowing, health and safety concern or wrongful dismissal, there is no cap on the compensation amount.