Unfair Dismissal Compensation

Nicola Mullineux

Nicola Mullineux

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02 Aug 2018

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

  • A reason that’s 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’s unfair.

How much compensation for unfair dismissal will I have to pay?

If the employment tribunal does rule in favour of your employee, they’ll 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 may have to pay an additional award if they fail to comply with a reinstatement or re-engagement order. This award is usually between 26 to 52 weeks’ pay.

The maximum basic award currently stands at £16,140 as of 6th April 2020.

This is up from £15,750 in the previous year. All the award caps rose in April 2018—they’ll also rose again in April 2019.

What is the maximum compensation for unfair dismissal right now?

Under the compensatory award, as of 6th April 2020, the UK's unfair dismissal compensation cap is £88,519 or one year of the employee's salary—the awarded sum is the lower of these two.

The government upped this figure from £86,444. The figure rose because every year the government reviews employment tribunal compensation caps in line with economic inflation.

In addition, as of 6th April 2020 the limit on one week's pay when working out the basic award for unfair dismissal (and statutory redundancy) has risen from £525 to £538.

These awards are payable under the Employment Rights (Increase of Limits) Order 2018 SI/2018/194.

This means the basic award, and the compensatory award, combined can be a whopping maximum of £104,659 in unfair dismissal compensation.

The average compensation for unfair dismissal

The latest figures we have available are from 2018/19. The average wrongful dismissal compensation award for this period was £13,704.

The importance of the date an employee makes their claim

If the employee started their claim for unfair dismissal before 6th April 2018, the most recent caps don't apply.

This is the case even if the tribunal awards the compensation after 6th 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 £6,562.

This figure is up from £6,408. The maximum award for an unfair dismissal involving health & safety, whistleblowing, or discrimination can be greater than the £88,519 cap.

How do I issue compensation payouts for unfair dismissal?

Due to the size of awards, you may want to know if you can pay compensation in instalments.

Or, if there are any other methods of payment that don’t involve paying out all at once.

But yes, it’s possible to pay in instalments. Just make sure you agree the:

  • Size of the payouts.
  • When they’ll occur.
  • How long for, with the affected employee.

Other scenarios

There may be other situations where you’re required to pay an unfair dismissal award.

Some employers request information on whether this affects how much is paid out and how you should pay.

Here we’ll look at a couple of the most common scenarios to see if there are any differences to note:

  • TUPE and unfair dismissal compensation: You’re at heightened risk of receiving unfair dismissal claims during TUPE. That’s probably why so many employers want to refresh their knowledge of the issue while undergoing a transfer. When it comes to the compensation, there are no differences from a regular unfair dismissal claim. The cap remains at £88,519. There’s important TUPE advice for businesses you can learn about if you’re facing this situation.
  • Redundancy and unfair dismissal compensation: The main question here is whether employees receive unfair dismissal and redundancy compensation. And, yes, they do. If you’re found to have unfairly dismissed an employee, you’ll need to pay them their redundancy pay entitlement plus their compensation. If you want to avoid an unfair dismissal claim as a result of redundancy, make sure you follow the correct process.
  • Acas and unfair dismissal compensation: Acas is a great source of information. It offers guidance on following fair disciplinary procedures.

Need our help?

If you need assistance with unfair dismissal compensation, get in touch with us on: 01455 858 132.

About the Author

Nicola Mullineux

Nicola Mullineux, as Group Content Manager, leads a team of employment law content writers who produce guidance and commentary on employment law, case law and key HR developments. She has written articles for national publications for over 10 years and regularly helps to shape employment of the future by taking part in Government consultations on employment law change.

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Nicola Mullineux

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