Constructive Dismissal Compensation: What's the Risk?

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07 Aug 2018

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Would having to pay out a maximum of £83,682 in constructive dismissal compensation be a drain on your business's financial resources?

Minimum and Maximum: How Much Compensation for Constructive Dismissal Could an Employee Win?

The basic award employees are eligible for is as follows:

  • One and a half week's pay for each year of employment aged 41 and above.
  • One week's pay for each year of employment aged 22-40.
  • Half a week's pay for each year of employment under the age of 22.

The maximum amount that employees can receive for a basic award payment is £15,240.

But That's Not All

Once the employment tribunal decides on how much of a basic award you must pay, they will turn to the compensatory award. This component of the constructive dismissal compensation awards ex-employees based on their losses as a result of their employer's actions. Types of losses include:

  • Previous wage loss.
  • Future wage loss.
  • Loss of statutory rights.
  • Pension loss.

Wage losses take into account things such as company car, health insurance, and other employee benefits. If the worker receives commission or bonuses, they can also claim for this, even if the payments have been discretionary. Future losses are always speculative, so there is some room for debate, but other losses are not, and together, these losses add up to a significant figure. The most a person can win is one year's salary. The statutory cap is £83,682—any employee who earns more than this in one year, for example, £84,000, will not be able to win more than this cap. The compensatory award is in addition to the basic award, not instead of. Considering the awards, legal fees, travel expenses, and other costs, you could easily end up paying over £100,000.

How Can You Avoid Paying Out Constructive Dismissal Compensation?

As an employer, all you can do is minimise the risk of a claim occurring. Be aware of all the terms of your employees' contracts. Make sure you regularly update policies and procedures to stay in line with legislation. Avoid actions that could disgruntle any employees to the point where they feel like their only option is to leave the business.

Talk To An Expert

There are constructive dismissal compensation calculators on the internet that can give you a rough idea of what you have to pay out. However, we advise that you speak to an expert at Croner for assistance including guidance and tribunal representation. Call 0808 145 3384 today. We've also written a guide on unfair dismissal compensation—check it out!

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