New employment tribunal compensation limits from April 2017

From 6 April 2017 limits on compensation which can be awarded by an employment tribunal will increase, meaning a finding of unfair dismissal could cost employers more.

Background

Employment tribunal compensation awards are increased each year in line with inflation, based on the September RPI figure. Last year this increased by 2%.

The relevant legislation, the Employment Rights (Increase of Limits) Order 2017 has now been laid before Parliament.

Increases from April 2017

For cases where the effective date of termination falls on or after 6 April 2017, the statutory cap on the compensatory award for unfair dismissal will rise from £78,962 to £80,541.

The maximum amount of a week's pay rises from £479 to £489. This means that the maximum statutory redundant payment and basic award in unfair dismissal cases will increase to £14,670 from £14,370.

Comment

It should be noted that since July 2013 the maximum compensatory award for unfair dismissal is the lower of the statutory cap or 52 weeks' pay (actual gross pay for the employee, calculated at the time of dismissal).

For lower paid employees therefore this increase will have no impact. However, employers face a higher potential bill in respect of the dismissal of higher paid employees from April.

Employers should ensure that managers and the HR team dealing with disciplinary and dismissal issues are fully trained to help mitigate the risk of unfair dismissal claims.