Proposals to limit compensation in Unfair Dismissal Cases

Unfair dismissal awards are split into 2 components, the basic award and the compensatory award.  The basic award is generally calculated using a formula based on number of years service, weekly pay and age.  In February 2013, the maximum limit on a week’s pay for this calculation rose from £430 to £450.

The compensatory element of an Unfair Dismissal award has regard to the loss suffered by the Claimant as a result of being unfairly dismissed.  In February 2013, the maximum compensatory award for unfair dismissal rose from £72,300 to £74,200.

The Government has announced that in Summer 2013, it intends to introduce a 12 month cap on the compensatory award for unfair dismissal claims.  The current cap on the compensatory award is £74,200.  This will continue to apply, the consequence being that the cap will be the lesser of 12 months pay or £74,200.

Whilst it is anticipated that employers will welcome such proposals, there is a concern that such limitations could increase the number of discrimination claims with the aim of over-coming the compensation cap.

For further advice on this and other employment matters, please contact me.

Kate Garrett
Solicitor & Head of Employment Team

0121 693 2222
or email Kate

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