Logo: Finers Stephens Innocent

GO
 
You can change the default text sizeSmall text sizeNormal text sizeLarge text sizeOrder here

Increase in the caps on Tribunal Awards

The issue

The amounts both of the basic award and of the compensatory award made by an Employment Tribunal for an employee who has been unfairly dismissed are subject to arbitrary caps.  (Compensation awards in discrimination or whistle-blowing dismissal claims are uncapped.)  The amount of the basic award made by an Employment Tribunal is calculated using the lower of the employee’s actual week’s pay or a capped sum for each week’s pay.  The cap on the compensatory award (for income loss) is a fixed amount.  Other awards are subject to minimum amounts.

For dismissals which take effect on or after Friday 1 February 2008 the caps on the basic and compensatory awards made by Employment Tribunals will be raised.

The Consequences

For dismissals effective on or after 1 February 2008: 

  • the cap on the compensatory award for unfair dismissal will rise to £63,000
  • the cap on the maximum amount of “a week’s pay” (used to calculate both the basic award for unfair dismissal and the statutory redundancy payment ) will rise to £330; and
  • the minimum basic award for some automatically unfair dismissals (e.g., those based on health and safety, working time or trade union membership) will rise to £4,400

Despite the raising of the cap, the compensatory award remains inclusive of any percentage increase (of between 10% to 50%) made for an employer’s failure to follow a statutory dismissal procedure

(The existing compensation caps continue to apply for dismissals taking effect prior to 1 February 2008.)

The Solution

To avoid employment tribunal claims and the cost of a compensation award, businesses should:

  • have dismissal, disciplinary and grievance procedures compliant with the statutory minimum requirements
  • ensure adherence to the guidelines in the ACAS Code of Practice on Disciplinary and Grievance Procedures
  • adopt an equal opportunities policy to reduce the risk of liability for discrimination claims
  • communicate such policies to all staff, provide training in and audit their fair operation
  • train managers to conduct disciplinary and grievance procedures fairly
  • obtain specialist legal advice before dismissing or taking any action to enforce employment obligations. 

OTheR CHANGES COMING SOON

From 6 April 2008 the Information and Consultation of Employees (“ICE”) Regulations 2004 requiring businesses to inform and consult their employees in relation to certain business issues are extended to cover businesses which employ 50 or more employees.  The ICE Regulations already apply to businesses with 100 or more employees. (They will not apply to businesses with less than 50 employees).

Information in this e-alert is a guide only. We recommend that you seek professional advice before taking or refraining from any action. No liability accepted by the firm for any action taken or not taken as a result of this publication.