When making remedy awards, employment tribunals are subject to certain limits and maximums which restrict the amount of compensation they can award. Each year these limits are reviewed and, generally, updated in line with the retail prices index (RPI).
The Employment Rights (Increase of Limits) Order 2018 sets out the increased limits which will take effect from 6 April 2018. Notable increases include:
- the limit on a week’s pay for calculating redundancy and the unfair dismissal basic award has reached £500 for the first time as it increases from £489 to £508
- the increase to a week’s pay means the maximum basic award for statutory redundancy payment and unfair dismissal is now £15,240, up from £14,670
- the maximum compensatory award for unfair dismissal has increased to £83,682 or a year’s pay, whichever is lower.
These mean the most an employment tribunal could award for an unfair dismissal, totalling the maximum basic and compensatory award, has increased to £98,922.
These new limits relating to dismissal compensation will apply for any dismissals where the effective date of termination is on, or after, the 6 April 2018. Any dismissals prior to this date will apply the previous compensation limits. It is worth remembering that there is no maximum compensation award for discrimination, therefore, discriminatory dismissals could led to a higher financial penalty for organisations.
Since tribunal fees were removed in July 2017, there is no financial barrier to employees or ex-employees wishing to make a tribunal claim. The annual increase to tribunal awards, along with other factors such as reputational damage, means it is becoming increasingly important that organisations are following correct procedures to avoid being taken to tribunal. With regards to dismissals, this means organisations should ensure they have a fair reason to dismiss, are following a fair procedure and are acting reasonably in all the circumstances.
All other statutory rates, such as the rate for statutory guarantee payments, have also been increased by the Order.