Unfair Dismissal Compensation: What's the Risk?


02 Aug 2018


An employment tribunal will award unfair dismissal compensation to your employee or ex-employee if it believes that you unfairly dismissed them. Types of unfair dismissal include:

  • A reason that is automatically unfair, such as discrimination.
  • Letting one of your staff go without following a fair dismissal procedure, such as in the Acas Code of Practice.
  • Another reason that is unfair.

If the employment tribunal does rule in favour of your employee, they will instruct you on how much compensation for unfair dismissal you must pay. Compensation for an unfair dismissal normally consists of a basic award and a compensatory award. Sometimes an employer has to pay an additional award (up to £26,416) if they fail to comply with a reinstatement or re-engagement order. The maximum basic award currently stands at £15,240 as of 6 April 2018. This is up from £14,670 in the previous year. Sadly for employers, all of the award caps rose in April 2018 and will rise again in April 2019.

The Compensatory Award: What is the Maximum Compensation for Unfair Dismissal Right Now?

As of 6 April 2018, the UK's unfair dismissal compensation cap is £83,682 or one year of the employee's salary—the awarded sum is the lower of these two. The Government upped this figure from £80,541. The figure rose because each year the Government reviews employment tribunal compensation caps in line with economic inflation. In addition, as of 6 April 2018, the limit on one week's pay when working out the basic award for unfair dismissal (and statutory redundancy) payments has risen from £489 to £508. These awards are payable under the Employment Rights (Increase of Limits) Order 2018 SI/2018/194. This means that the basic award and the compensatory award combined can be a whopping maximum of £98,922 in unfair dismissal compensation.

The Importance of the Date that an Employee Makes Their Claim

If the employee started their claim for unfair dismissal before 6 April 2018, the most recent caps don't apply. This is the case even if the tribunal awards the compensation after 6 April.

Unfair Dismissal Compensation for Health & Safety Cases

If a dismissal is unfair by virtue of health & safety, trade union involvement, employee representation, or reasons to do with an occupational pension trustee, the minimum award is £6,203. This figure is up from £5,970. The maximum award for an unfair dismissal involving H&S, whistleblowing, or discrimination can be greater than the £83,682 cap.

Acas and Unfair Dismissal Compensation

Acas is a great source of information; they offer guidance on following fair disciplinary procedures.

Talk to an Expert

If you seek more advice on unfair dismissal compensation, contact our employment law experts on 0808 145 3375.

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