New compensation limits from April

New compensation limits from April

Published:

Author: Michael Briggs

New limits for awards for compensation for unfair dismissal, and statutory redundancy pay, will apply where the dismissal takes place on or after 6 April 2015.

Background

The Employment Rights (Increase of Limits) Order 2015 has been published confirming the annual increase to compensation limits for unfair dismissal and other awards. In particular, the Order raises the limit on compensation for unfair dismissal and a week's pay as follows:

Award Current rate New rate from 6 April 2015
Maximum compensatory award for unfair dismissal £76,574 £78,335
Maximum for a week's pay  £464  £475
Maximum basic award for unfair dismissal  £13,920  £14,250

The increases are in line with the RPI measure of inflation as at September 2014, which was at 2.3%.

The maximum rate of a week's pay may also be used to calculate statutory redundancy pay; the amount of which varies depending on age, length of service and gross weekly pay. By way of reminder an employee is entitled to:

  • 1.5 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 inclusive; and
  • 0.5 week's pay for each complete year of service below the age of 22.

The maximum length of service that may be taken in to account in calculating redundancy pay is 20 years.

Employers are therefore encouraged to ensure that their payroll systems are updated to reflect the above maximum week's pay rate in readiness for any calculations for statutory redundancy pay on or after 6 April 2015.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

About the Author

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Michael Briggs

Senior Associate

03700 86 5066

Michael is an experienced employment lawyer who provides practical, commercial and results-driven advice to a wide range of clients in respect of disciplinary matters, redundancy & reorganisation, absence and performance issues, employment contracts & handbooks and executive appointment & exits. Michael also defends employment tribunal claims.

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