The Employment Rights (Increase of Limits) Order 2019 contains the revised compensation limits which will take effect from 6 April 2019, meaning it will apply where the “appropriate date” is on or after this date. For example, in unfair dismissal awards, the new limits will apply where the effective date of termination is on or after 6 April 2019.
The Order sets out the following increases:
- the limit on a week’s pay will increase from £508 to £525
- the amount of statutory guarantee pay payable will increase from £28 per day to £29
- the limit on the maximum unfair dismissal compensatory award will rise from £83,682 to £86,444.
Other statutory awards, including the minimum basic award for trade union or dismissals, will also rise from this date.
The increase in the amount that can be awarded for a week’s pay will affect the maximum amount of a statutory redundancy payment or the unfair dismissal basic award. The maximum compensation award for these two matters (ie 30 weeks’ pay) will now work out as £15,750.
As a result, the total maximum compensation award that can be made to a claimant who successfully brings an unfair dismissal claim will be £102,194 – calculated as the maximum basic award plus the maximum compensatory award. Although this now reaches over £100,000 for the first time, the maximum compensatory award remains subject to the limit of 52 weeks’ pay, therefore, this total will only be reached where the claimant was paid a significant salary.
Although the annual compensation award increases are generally expected, they do highlight the increasing financial risk of being taken to tribunal and the ever-increasing costs of internal processes, such as a redundancy procedure. Organisations are encouraged to ensure they are following best practice, and any internal policies, when seeking to take action against an employee which could result in their dismissal. They may also wish to use alternatives which lead to an amicable resolution for both parties whilst preventing subsequent employment tribunal claims, such as using settlement agreements to mutually terminate employment.