Employment tribunal payouts to increase

On 6 April 2021, the statutory limits on certain employment tribunal awards and other amounts payable under employment legislation will increase according to the Employment Rights (Increase of Limits) Order 2021.

The two main points of note are:

• The limit on compensatory awards for ‘ordinary’ unfair dismissal will increase from £88,519 to £89,493
• The maximum limit on a week’s pay for the purpose of calculating statutory redundancy payments, as well as the basic award for unfair dismissal, will increase from £538 to £544.

These limits will apply if you are dismissed or made redundant on or after 6 April 2021.

How are unfair dismissal awards calculated?

There are two types of award for unfair dismissal – a statutory basic award based on your weekly salary at the time of dismissal, and a compensatory award that takes into account the losses you have sustained due to your dismissal.

The basic statutory award is based on your weekly gross pay at the time you were dismissed, as well as the amount of time you worked for your employer and your age, as follows:

• Half a week’s pay for each year of employment under the age of 22
• A week’s pay for each year of employment between the ages of 22 and 40
• One and a half week’s pay for each year of employment over the age of 41.

The basic award payment is capped at 30 weeks’ pay up to a maximum of £16,320 (up from £16,140).

The compensatory award is more complex, and is based on what the tribunal feels is fair to compensate you for:

• Loss of wages/future wages
• Loss of statutory rights (if you have been working for your employer for under the statutory two year threshold for unfair dismissal protection).
• Loss of pension.

The cap on the amount you can be awarded as compensation for unfair dismissal is now £89,493 OR 52 weeks’ gross salary – whichever is lower. This is in addition to the statutory basic award of a maximum £16,320.

When the cap comes off

There are certain claims for which this upper compensatory limit does not apply, however. These include:

• Whistleblowing
• Discrimination
• Breach of health and safety
• Dismissal after trying to assert a statutory right.

For example, a 2018 case saw the former chief executive of International Petroleum, Alexander Osipov, awarded a £2 million payout when he was fired after making protected disclosures under whistleblowing legislation.

Sources:

https://www.legislation.gov.uk/uksi/2021/208/schedule/made

https://www.cipd.co.uk/knowledge/fundamentals/emp-law/about/statutory-rates

https://www.personneltoday.com/hr/directors-must-pay-2m-in-landmark-whistleblowing-case/