Polkey, otherwise known as Polkey reduction, is a cutback in the compensation amount made to a claimant after a successful unfair dismissal claim, which reflects the likelihood of a fair dismissal in any situation.

Taking its name after the famous case of Polkey v AE Dayton Services Ltd [1987] IRLR 503, the Polkey reduction may be expressed as a percentage reduction or a limit on the future loss.

Therefore, the reduction made to the compensatory amount under Polkey is done to establish the fact that whether or not the employer had taken certain procedural steps while implementing a redundancy dismissal, it won’t have made any difference to the dismissal decision.

Subsequently, if an employee is able to successfully claim for an unfair dismissal, the Employment Tribunal will award a compensation amount that will be deemed to just and equitable under all circumstances.

In other words, just because an employee has been successful in his or her claim against wrongful dismissal, it will not necessarily follow that the claimant receives the full compensation amount.

Furthermore, the tribunal will consider all circumstances and might sanction some deductions because the entire case needs to be equitable for both parties.

What is a Polkey deduction?

Employment Law categorises the Polkey reduction as a cutback made in the compensation amount to establish the likelihood that the decision will be just and equitable, regardless of who wins the claim.

The acting principle behind such a deduction is to reflect that a claimant must not be compensated over and above what would be a true reflection of his or her loss.

In Mr. Polkey’s case of 1987, the tribunal sanctioned a reduced compensation amount to reflect the fact that while the employer did fail to undertake certain procedural steps and implemented his redundancy dismissal (this qualified this case as an unfair dismissal), those steps would not have made any difference to the dismissal decision.

Subsequently, the dismissal would still be unfair, however, the Employment Tribunal assessed the situation diligently to establish whether there would be any difference to the claimant’s circumstances.

How Does an Employment Tribunal Decide to Make a Polkey deduction?

Once an aggrieved employee makes an employment tribunal claim for unfair dismissal, the tribunal assesses the claimant’s losses including the loss of financial earnings post-dismissal.

Thereafter, they will give credit for any amounts, which the claimant may have received from the employer following dismissal.

It is after all this that the tribunal may decide to apply the Polkey deduction. Having said this, there may be additional deductions that are applied after the Polkey deduction, depending upon the tribunal’s findings.

How will the Tribunal Decide What Polkey Deduction to Apply?

Over the years, a number of cases have been made to this point. Subsequently, the key principles developed here include –

the Tribunal must consider the probable thought processes of the employer;
the Tribunal must review all of the available evidence and not that provided by the Employer;
the Tribunal should make an assessment of what did likely happen, using its experience, sense of justice and confidence;
even if the employer behaves unreasonably in front of the tribunal or the claimant, the Tribunal must still consider the possibility of Polkey;
deductions must only be made in cases wherein the dismissal is either substantively or procedurally unfair.

What Percentage of Polkey Deduction will be made?

No two employment tribunal cases are same, therefore, the percentage of the Polkey deduction depends on the circumstances of the dismissal and other inherent aspects of the case.

Subsequently, the employment tribunal may decide on making either a percentage reduction in the compensation amount or placing a cap on the length of future loss.

Having said this, the tribunal can sanction Polkey deductions up to 100 percent in some cases. Furthermore, even if the tribunal finds that the only reason for the dismissal being unfair, is a procedural error, some percentage deduction would still be made.

In some cases, if the tribunal finds that dismissal would have taken place anyway, however, the employer implemented a proper procedure after a couple of days or weeks, they can cut back compensation by limiting to a period of time.

For example, an employee is able to successfully argue that the employer did miss a stage in the absence management procedure, and therefore, they should have been given an extra warning before dismissal.

While the dismissal will still be unfair here, the Employment Tribunal may limit compensation to one additional month, in line with the length of time, which was required by the employer to follow that extra step.