Compensation limits increases

Annual increases in the limits on compensation for unfair dismissal and statutory redundancy pay are effective for any dismissals that take place on or after 6 April 2021. New guidance has also been issued in respect of injury to feelings compensation in claims presented on or after 6 April 2021.

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Annual increases in the limits on compensation for unfair dismissal and statutory redundancy pay are effective for any dismissals that take place on or after 6 April 2021.   New guidance has also been issued in respect of injury to feelings compensation in claims presented on or after 6 April 2021.

The government revises compensation limits for unfair dismissal and statutory redundancy pay annually in line with the retail price index.  For employees whose effective date of termination falls no or after 6 April 2021, the cap on a week’s gross pay for the purposes of calculating statutory redundancy pay is now £544.  This means that the maximum compensation for statutory redundancy pay (for an employee with 20 or more years’ continuous service over the age of 41) is now £16,320.

For unfair dismissal claims where the employment ended on or after 6 April 2021, the maximum compensatory award available is now £89,493, or one year’s pay if this is lower.  According to the Office of National Statistics, the average salary in the UK in 2020 was £38,600 for a full - time role and £13,803 for a part time role, so in practice the maximum compensatory award in unfair dismissal claims will be far lower than the cap.  In some cases a successful claimant will also be eligible for the so-called basic award, which is calculated in the same way as statutory redundancy pay  - if the claimant has already received a correctly calculated statutory redundancy payment from their former employer they will not receive any basic award.

Discrimination and whistleblowing claims are not subject to any cap on compensation and may also attract compensation for injury to feelings.  Injury to feelings compensation is assessed in “bands”, established by the judiciary.  The Presidents of the Employment Tribunals in England and Wales and Scotland have produced joint Presidential Guidance for assessment of injury to feelings compensation in claims presented on or after 6 April 2021, as follows:

Lower band (less serious cases): £900 – 9,100

Middle band (cases not meriting an award in the upper band): £9,100 – 27,400

Upper band (the most serious cases): £27,400 - £45,600

In exceptional cases it may be appropriate to make an award in excess of £45,600

Further reading

Disclaimer

This news item is not intended as a comprehensive summary of the subject matter and does not constitute legal advice. Parties are advised to obtain professional advice addressing individual facts and circumstances before acting on this information.