Compensatory Award | Unfair Dismissal

The Compensatory Award is now capped at £115,115 (from 6th April 2024) or one year's gross pay, (excluding pension contributions, benefits-in-kind or discretionary bonuses).

An employment tribunal will award the lower sum - so if an employee's gross pay is less than £115,115 they will receive this, rather than the higher compensatory award amount.

The award is intended to compensate the employee for financial loss relating to the dismissal, including expenses and loss of benefits.

The Employment Tribunal considers the following:

1. Loss of Wages
This is from the date of dismissal until the Tribunal hearing, net of tax and national insurance contributions. If notice was given to the employee the time will run from the end of the notice period until the hearing. If the employee claims benefit during this time this will be taken into account and taken off the final amount they receive.

2. Future Loss of Wages
The tribunal will estimate how long the employee will remain out of work in the future. This is based on their age, experience and market demand for their type of skills. If the employee already has a new job they will not receive this award.

However, if the new job pays less the tribunal will award a figure for the time it takes for the employee's pay to rise to the previous figure earned in the previous job. There is obviously a lot of guesswork involved here.

3. Loss of Perks
Health care, company car, etc.

4. How Dismissed
If the employee was dismissed in such a way that it made it harder for the employee to find a new job. For example, they were dismissed in a public way from a company working in a close-knit market, so "the word got around", the tribunal will take account of the damage done. However, the tribunal will not consider their hurt feelings.

5. Loss of Employment Protection
The employee will start off again from zero in their new job and will have to work for 2 years with their new employer to regain unfair dismissal protection, the tribunal will take this into account. The tribunal will also award compensation for the loss of notice period gained under the previous job.

6. Loss of Pension Rights
The tribunal will usually follow certain guidelines to work out this figure.

Compensatory Award Deductions
The tribunal will make the following deductions from the Compensatory Award:

1. Redundancy payments under the employee's contract.

2. Payments made by the employer to the employee due to the dismissal.

3. Deductions will also be made where the employee shares some blame for their dismissal.

4. Deductions where the employee has not made an effort to find a new job or has refused suitable job offers. Obviously the tribunal wants to avoid the situation where an ex-employee sits back and waits for the maximum compensation to come rolling in.

5. Where the dismissal was actually fair, but the way it was carried out was unfair the award will be reduced.

6. Where the employee is given written notice that an appeal procedure is available, but chooses not to appeal. The compensation can be reduced by up to 2 weeks in these circumstances, but can be increased by up to 2 weeks if the employer prevented the employee using the appeals procedure.

7. The employee did not comply with the ACAS code.

Any Income Support or Jobseekers Allowance received by the employee whilst not working will be recouped by the DWP who will serve a notice on the employer. The employer then only pays the employee the compensation minus the recoupment figure.

Additional Award | Unfair Dismissal

Employment Law