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New Cap on Unfair Dismissal Awards

15.04.2021: At present, in very general terms, a successful claimant in an unfair dismissal claim will get a basic award (the same as a statutory redundancy payment) plus a compensatory award for loss of earnings, pension etc.

The compensatory award will be capped at – the lower of £89,493 (or £88,519 if dismissed before 06.04.2021), or 52 weeks pay.  Therefore, if someone earned £35,000 per annum, the maximum compensatory award claimable for unfair dismissal will be £35,000.

In practice, the vast majority of compensatory awards come nowhere near the current cap of £88,519. However on rare occasions an older claimant for example may claim 2 or 3 years loss of salary on the basis that they will find it very difficult to get another job due to their age. This change aims to stops that kind of open ended claim. However canny claimants are also likely to claim unlawful discrimination where possible, because compensatory awards in discrimination claims are still not capped.

This change gives employers some reassurance about the maximum value of any straight forward unfair dismissal claim. It’s worth noting though that Tribunal’s make compensatory awards normally based on net losses (up to the first £30,000). A ‘weeks pay’ is however is a gross figure. A weeks pay for someone earning £35,000 pa is roughly £673 gross or £511 net. Therefore if that person’s compensatory award is capped at £35,000 gross that is equivalent to 68 weeks net pay. Therefore a Claimant may still be able to get over one years net pay, regardless of the cap. Confused? You won’t be the only one.

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