Unfair dismissal – new compensation increases take effect

Clients frequently ask us about the potential financial awards that employees can receive in successful unfair dismissal claims. Providing a specific answer to this question can be challenging without knowing the details of the claim. The compensation awarded by an Employment Tribunal depends on various factors, including the legal categories of the claims successfully brought, statutory limitations, and the employee’s conduct in mitigating the compensation they are seeking.

Typically, the Government revises the important rates and limits that govern the potential awards for certain unfair dismissal claims in Employment Tribunals every April. This year, taking into account inflation rates, there has been a notable increase in the rates and compensatory limits which apply to common Employment Tribunal claims.

Unfair dismissal compensation – the new limits (as of 6 April 2023)

Employers and HR consultants should take note of the following key compensatory limits regarding ordinary unfair dismissal claims starting 6 April 2023.

Unfair dismissal compensation in successful claims is comprised of two key elements – a basic award and a compensatory award.

The basic award is calculated according to a mathematical formula including the employee’s length of service, weekly pay, and age.  The new maximum basic award is £19,290.

The compensatory award is designed to reflect a sum that the Tribunal considers “just and equitable” when assessing the actual losses suffered due to the employer’s conduct.  Commonly this involves an assessment of the degree to which an employee has missed out on wages, but it can include other losses sustained due to the dismissal like pension losses or expenses.  The new maximum award is £105,707.

Whilst these figures represent the maximum award an employee could hope to achieve, employers need to be aware of the new increases when considering whether to dismiss an employee. In addition, several other employment claims like discrimination, whistleblowing, and claims known as automatic unfair dismissal claims have no compensatory limits so this is equally worth being aware of.

To speak to us about your unfair dismissal compensation or other employment issues, please contact Alex Kiernan.