Unfair dismissal: financial remedies and reductions

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Often when representing clients in unfair dismissal claims, the first question we are asked is, what remedy is available to me if I win at tribunal?

This short article will explain the various types of financial awards available in the event of a successful unfair dismissal claim. It will also explain the circumstances where a tribunal may reduce an award, and explain the impact of the ACAS Code of Practice on awards. This piece will not address the remedies of reinstatement or reengagement, nor remedies in respect of discrimination claims.

Basic award for unfair dismissal

The first award available in the event of a successful unfair dismissal claim is known as the basic award. This is based on the same statutory formula as a statutory redundancy payment. The claimant’s age, length of continuous service and gross weekly pay is considered here.

The basic award is subject to a statutory cap. A cap of 20 years’ service is placed on the period of continuous service, and the amount of a week’s pay is also capped by a statutory maximum. As of 6 April 2024 the statutory cap on a week’s pay will be £700. The maximum value of a basic award will hence be £21,000 from 6 April 2024.

Please note that in circumstances where the dismissal is found to be unfair on prohibited trade union grounds, the minimum basic award will be £8,533 as of 6 April 2024.

If a tribunal finds that the claimant’s conduct has caused or contributed to the dismissal, it can reduce the basic award in circumstances where it would be just and equitable to do so.

Compensatory award for unfair dismissal

The second type of award is known as the compensatory award. This is designed to compensate the employee for the actual losses flowing from dismissal, provided those losses are attributable to the employer. This ordinarily means the immediate loss of wages from the date of dismissal until the date of the hearing on remedy, loss of pension rights, future loss of wages, and loss of statutory protection against unfair dismissal (for which an employee requires at least two year’s continuous service). Any income received from new employment is deducted from this award, any payments received in the form of income-based benefits can be recouped, and, in circumstances where the employee has been paid in lieu of notice, this is offset against the compensatory award.

Like the basic award, reductions can be made if the tribunal finds the employee has caused or contributed to the dismissal. In circumstances where the tribunal finds that the claimant has unreasonably failed to mitigate his/her loss, it can also apply a deduction to the compensatory award. In addition, in circumstances where the dismissal is found to be procedurally unfair, a tribunal can reduce the compensatory award to reflect the chance that the claimant would have been dismissed in any event and that the employer's procedural errors accordingly made no difference to the outcome. This is known as a Polkey reduction.

Although the prospect of a contributory fault reduction, a failure to mitigate reduction, and Polkey reduction maybe disappointing for claimants, where an employer has unreasonably failed to follow the ACAS Code of Practice for poor performance or misconduct, the tribunal may increase the amount of compensation awarded by up to 25%, if it considers it just and equitable to do so.

Please note that the absolute maximum a tribunal can make in respect of a compensatory award is the lower of 52 weeks’ wages, or from 6 April 2024, £115,115.

Guidance on unfair dismissal claims

In terms of guidance for claimants pursing an unfair dismissal claim, our advice would be to:

  1. Gather as many payslips as possible from your previous employer, to enable you to work out your losses stemming from dismissal and weekly wage.
  2. Gather any information you have regarding your occupational pension contributions.
  3. Record all attempts to secure alternative work post dismissal. A note of all posts applied for, the dates that the application was made, interviews progressed and outcomes of the application, as well as any supporting documentary evidence to confirm same. This would assist in challenging any argument made by the employer that you have failed to mitigate your loss.
  4. Apply for state benefits and keep a record and evidence of any benefits received.
  5. If you secure alternative work, gather payslips from your new employer. This will assist in calculating the compensatory award.

Please note that the limitation period for lodging a tribunal claim for unfair dismissal is three months minus one day from the date of the dismissal.

If you have been unfairly dismissed and are looking for advice, please do not hesitate to contact our approachable expert employment law team.

Email Alice Bowman
Call our employment law team free on 0808 560 0872
Arrange a callback by using our enquiry form

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