Every year the limit for compensation awards in
the tribunal is reviewed, usually increasing. From 1 February 2013 the
maximum compensatory award for unfair dismissal will rise from £72,300
to £74,200.
This sounds like (and indeed is) a lot of money. However, this large figure probably gives the wrong idea to both Claimants and employers defending claims. Claimants see this figure and often have unrealistic expectations of what can be achieved in Tribunal. Equally employers are often very concerned that if they receive a claim they will end up paying a huge amount in compensation to the employee if they lose.
In reality, it is quite rare for Tribunals to award a successful Claimant much more than a year’s salary. With average earnings in the UK being £26,500 this is a great deal less than £74,200. The aim of the compensatory award is simply to place the Claimant in the same position they would have been in had they not been dismissed. There is also a duty on the Claimant to try to mitigate their loss and look for alternative employment.
The government has recently been consulting on various matters around “ending the employment relationship”. As part of this they have produced a final impact assessment on unfair dismissal compensatory awards. The decision is that, as part of the Parliamentary process, the government will introduce earnings based cap on the compensatory award for unfair dismissal claims. This means Claimants will have their awards capped at 12 months loss of earnings (provided that this equates to less than the overall cap of £74,200).
Overall this move is welcome as it will assist us in managing the expectation of Claimant’s and will provide more guidance to employers when they are considering settling claims against them.
This sounds like (and indeed is) a lot of money. However, this large figure probably gives the wrong idea to both Claimants and employers defending claims. Claimants see this figure and often have unrealistic expectations of what can be achieved in Tribunal. Equally employers are often very concerned that if they receive a claim they will end up paying a huge amount in compensation to the employee if they lose.
In reality, it is quite rare for Tribunals to award a successful Claimant much more than a year’s salary. With average earnings in the UK being £26,500 this is a great deal less than £74,200. The aim of the compensatory award is simply to place the Claimant in the same position they would have been in had they not been dismissed. There is also a duty on the Claimant to try to mitigate their loss and look for alternative employment.
The government has recently been consulting on various matters around “ending the employment relationship”. As part of this they have produced a final impact assessment on unfair dismissal compensatory awards. The decision is that, as part of the Parliamentary process, the government will introduce earnings based cap on the compensatory award for unfair dismissal claims. This means Claimants will have their awards capped at 12 months loss of earnings (provided that this equates to less than the overall cap of £74,200).
Overall this move is welcome as it will assist us in managing the expectation of Claimant’s and will provide more guidance to employers when they are considering settling claims against them.
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