Compensation for unfair dismissal to be reduced

The Enterprise and Regulatory Reform Bill currently being discussed in Parliament introduces the power to adjust the maximum compensatory award for unfair dismissal. This is the award made on top of the basic award.to employees who win their case for unfair dismissal and have suffered loss of earnings.

The current cap is a massive £74,200 which added to the maximum basic award of £13,500 inevitably raises expectations that employees could get this amount and may cause employers to enter into higher settlements accordingly.

In fact the median award for unfair dismissal last year (2011-2012) was around £4,000 and the average about £8,000.

This is good news for employers as in future the maximum compensatory award is to be capped at 12 month’s salary.

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