How much compensation will I receive for unfair dismissal?
Unfair dismissal can be a challenge at the best of times, when contemplating bringing an unfair dismissal claim in the Employment Tribunal, it can be helpful to have a good understanding of its potential value.
If your claim is successful, the Employment Tribunal may order compensation which consists of:
- A basic award – to reflect the fact that you have been unfairly dismissed.
- A compensatory award – to compensate you for financial losses suffered as a result of being unfairly dismissed.
- Reinstatement/ Re-engagement – this means that you would continue employment with the employer in the same role (reinstatement) or in a comparable role (re-engagement).
1. Basic award
The basic award is calculated as follows:-
- 5 weeks’ pay for each complete year of service after reaching the age of 41;
- 1 week’s pay for each complete year of service between the ages of 22 and 40;
- 0.5 week’s pay for each complete year of service under the age of 22.
The basic award is subject to a maximum of 20 years’ service.
A week’s pay is calculated with reference to gross pay (i.e. before tax, NI and other deductions). A week’s pay is also subject to a statutory cap of £571 (from 6 April 2021).
If the reason for your dismissal was redundancy and you have received a statutory redundancy payment, the Employment Tribunal will offset the amount you received against the basic award.
2. Compensatory award
There is no set compensatory award as the Employment Tribunal has discretion as to how much is awarded, considering an amount which is deemed just and equitable in all the circumstances, having regard to the loss sustained by you as a result of the dismissal.
The aim of the compensatory award is to compensate you for any loss of earnings (from the date of the dismissal to the date of the Employment Tribunal hearing) and future losses if alternative employment has not been found. The Employment Tribunal will also consider any other direct losses incurred as a result of the unfair dismissal e.g. expenses associated with re-training.
The compensatory award is normally subject to a statutory maximum, and from 6 April 2021 the maximum award is either £93,878, or 52 times a week’s gross pay (whichever is the lower amount applies). For example, if your gross annual pay is £25,000, the maximum award will be limited to £25,000.
This statutory maximum, however, is not applicable to cases of automatic unfair dismissal (i.e. a dismissal as a result of whistleblowing or raising health and safety concerns), or when the dismissal is found to be discriminatory. In these cases, loss of earnings are uncapped.
The compensation award may be subject to increases or deductions, in cases such as:
- Failure to mitigate – a deduction may be made where you have failed to take steps to find an alternative job. You must be aware that you are under a duty to mitigate your losses. This means that you must make reasonable efforts to obtain alternative employment, and you must be able to evidence this to the Employment Tribunal i.e. by producing job applications;
- Earnings – the Employment Tribunal will take into account any increase in salary or other benefit that you would have received if you had not been dismissed. This is the case even if the increase is above your contractual entitlement. For example, if you would have received a bonus if you had not been dismissed, this may form part of your compensation award;
- Polkey – where your dismissal is found to be procedurally unfair, the Employment Tribunal may still make a deduction where you would have been dismissed in any event for the same or another reason (this is known as a Polkey deduction);
- Contribution – where the Employment Tribunal considers that you have contributed in some way to your dismissal, the compensatory award will be reduced. For example, if you have committed an act of misconduct and were dismissed as a result.
3. Reinstatement and re-engagement
As an alternative to compensation offered with Basic and Compensatory award, a Tribunal may make an order for reinstatement or re-engagement.
Reinstatement means that you would return to your job in the same role, on the same terms and conditions, and you would be treated by your employer as if you had never been dismissed.
Re-engagement means that you would return to work for the employer, but in a different role or in a different team, but would be on very similar terms and conditions.
It is rare for a Tribunal to make such an order as employees do not normally wish to return to work for the employer and it can often be impractical for them to do so.
If a reinstatement order is not complied with by the employer, you will be entitled to compensation as awarded by the Tribunal.
Many Employment Tribunal cases settle before ever reaching a final hearing and attempts to negotiate a settlement of a claim or potential claim can be made at any point during the tribunal process, or even before a claim is issued.
Settlement negotiations normally take place via Acas. If a settlement is reached, the agreement will be recorded in the form of a COT3.
Specialist employment solicitors
Our team of experts have a wealth of experience and expertise in dealing with complex unfair dismissal cases, for more information on how we can help, check out our Unfair Dismissal Services or get in touch with a member of the team.
Make sure to read our latest blog: Have I Been Unfairly Dismissed? For more practical advice and guidance on unfair dismissal claims. .
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