Increase in maximum compensation for unfair dismissals

The maximum compensation that the Employment Tribunal can award employees for unfair dismissal, and the basis upon which statutory redundancy payments are calculated, will increase from 1 February 2011 through the Employment Rights (Increase of Limits) Order 2010.

The increase will not apply in exceptional cases.

The following will relate to dismissals in which the effective date of termination falls on or after 1 February 2011:

  • A week’s pay – for the purposes of calculating the basic award in unfair dismissal cases and statutory redundancy payment entitlements – will be capped at £400 (the current limit is £380).
  • The maximum compensatory award for unfair dismissal – save in the prescribed exceptional cases – will be capped at £68,400 (the current limit is £65,300).

Compensation awarded for unfair dismissal claims is in the vast majority of cases made up of two strands: the basic award and the compensatory award. 

The basic award is calculated by applying a formula based on age, length of service and a week’s pay. 

As a result of the increase in a week’s pay, the maximum total basic award will from 1 February be capped at £12,000. 

The compensatory award is not based on a formula and is designed to compensate the employee for the loss that he/she has suffered.

As a result of these increases, the maximum amount which a successful claimant for unfair dismissal can recover will be capped at £80,400.

Various other statutory compensation limits are also increased from February.

Read more articles on statutory redundancy payments