How is unfair dismissal compensation calculated? | Blog | Paul Doran Law

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How is unfair dismissal compensation calculated?

If you win your unfair dismissal case, you’ll receive a payment made up of two parts – a basic award plus an additional amount as compensation for losing your job.

Basic award

The basic award is a fixed sum calculated using a set formula:

• Length of time you worked for your employer
• Your age when you were dismissed
• Your gross weekly pay on dismissal

If you worked for your employer for more than two years, you’ll receive:

• 1.5 weeks’ pay for each complete year of employment when you were aged 41 or over

• 1 week’s pay for each complete year of employment when you were between 22 and 40 inclusive

• 0.5 week’s pay for each complete year of employment when you were under age 22
If you worked for your employer for less than two years in GB (or one year in Northern Ireland), you only have the right to claim for unfair dismissal if it’s for an ‘automatically unfair’ reason such as pregnancy or discrimination.

Calculating a redundancy payment is not always straightforward:

• The maximum number of years you can include is 20 (even if you worked there for more than 20 years)

• If you were dismissed on or after 6 April 2017, the maximum gross weekly pay you can claim is £489 in GB or £500 in NI (even if you earned more than that)

• If you were dismissed for working as a health and safety representative or trade union representative, you’ll get a set minimum basic award

In some situations, the tribunal might reduce your basic award. For example:

• Your employer offered your job back but you refused and the tribunal thinks it would have been reasonable for you to return
• Where the tribunal thinks you were guilty of misconduct (such as theft, or deliberately breaching health and safety rules)
• Where you received statutory redundancy pay

Compensatory award

The compensatory award is to make up for the money you’ve lost as a result of being dismissed unfairly. It covers the time between your dismissal and finding a new job, and can be calculated weekly or monthly.

The maximum compensation the tribunal will award is one year’s gross pay.

Your compensation might also include an amount to make up for the fact that you’ll have to work in your new job for two years before you regain the right to claim for unfair dismissal. This is called ‘compensation for loss of statutory rights’ and is likely to be between £250 and £500. To qualify, you must have worked for your employer for at least two years (if you started on or after 6 April 2012), or one year (if you started before that).

If your new job offers at least the same income and benefits as your old job…

The tribunal will simply multiply your usual pay by the number of weeks or months you were out of work.

If your new job is temporary, or pays less than your old job…

The tribunal will estimate how long it will take you to find a job at the same level as the old one, and award compensation based on that.

If you haven’t yet found a new job…

The tribunal will estimate compensation to cover the time between dismissal and when they *think* you’ll find a new job, based on your age, pay and the kind of work you’re trained to do.

They will assume a short time between jobs if:

• You’ve had several jobs before
• You have never been out of work for long
• You have good references
• You could do agency work that pays a similar wage to your old job
• You can drive, or have easy access to public transport, so you could get a job further from home

They will assume a longer time between jobs if:

• You’re a skilled worker OR you have limited work experience
• There are limited local vacancies for your type of work
• You’ve had long periods out of work in the past
• You don’t have any references
• You are aged 50 or over
• You have a disability that limits the jobs you can apply for (or when a new employer will need to make adjustments in order for you to be able to work there)
• You are unable to work because of ill-health caused by your dismissal, such as depression (you’ll need to provide medical evidence for this)
• You are a carer and can’t find a job that fits with your caring responsibilities
• You don’t own a car and public transport is limited where you live
• You were dismissed for dishonesty

You will have to provide evidence that you’ve been trying to find a new job, such as keeping a record of your efforts and copies of your job applications.

The tribunal will expect anyone to find a new job within two years of dismissal, even if it’s on a lower wage.

Exceptions

Your compensation might be reduced if:

• You’re partly to blame for your dismissal (such as being abusive to a colleague, or being drunk at work)
• Your employer would have dismissed you anyway, even if they didn’t follow a fair procedure when they did so
• You haven’t done enough to find a new job
• You were deliberately obstructive during the investigation
• You failed to attend disciplinary or appeal meetings (and didn’t have a good reason for missing them)
• You have been too ill to work since you were dismissed

Summary

You need to be realistic about how much to expect, and be aware that your employer may offer you a settlement to avoid going to the tribunal. As employment lawyers, we can help with that.

Need help?

For a FREE assessment of your claim, call 0808 168 7288 or fill in the contact form on the top right of this page.

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