How is unfair dismissal compensation calculated?

Let’s say you’ve been dismissed or your job role has been made redundant, and the employment tribunal has ruled it as unfair. You might be wondering how much money you’ll receive.

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

But how is the actual amount calculated?

Read this article which explains it all. You’ll discover what you need to know about the basic award first, then the compensation award…

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 (one year in Northern Ireland), you’ll receive:

• 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
• 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.

OK, but what if you were made redundant unfairly?

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

Other benefits

If you received other benefits on top of your pay, the value of those will be included in your award. For example:

• Pension contributions made by your employer
• Free or subsidised accommodation they provided
• Company car, mobile phone or other tangible assets
• Company medical insurance

As with many legal matters, there are always exceptions…

Exceptions

You’ll get a set minimum basic award if you’re dismissed for being a health and safety or trade union representative or member.

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

“The team was very kind, considerate and understanding about my situation, and that it was a really stressful time for me. I really appreciate all their help. They got my head above water.”
Laura

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About us: At Paul Doran Law, we specialise in employment law – this includes settlement and severance matters as well as claims about equal pay, discrimination, unfair or constructive dismissal, and unpaid wages or holiday pay.

We’re on your side: We only act for employees who find themselves in a dispute with their employers.

About you: Whether you work for a multi-national corporation, public sector, private sector or small employer, we can help. We act for clients in Northern Ireland, England, Wales and Scotland.

Easy payment options: You’ll have a choice of ways to fund your claim, including no win, no fee. Often, your employer will pay our fee.

What next: Give us a call today for friendly, clear and honest advice about your case. The initial consultation is FREE and with no obligation.

Now that you’ve learned about the basic award, let’s look at the compensatory element…

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).

Once again, there is a standard formula for the tribunal to follow when calculating the amount you’ll get…

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.

What are the variables?

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

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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.

“I was kept in the loop the whole time. “Any questions I had were answered almost instantly. They would email me within the hour and ask if I wanted them to explain the answers by email or in a phone call – it was brilliant.”
Caroline

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

Note that you won’t get compensation for stress or upset caused by being dismissed – unless you’re also claiming discrimination.

Also, you won’t be awarded compensation for the costs or time involved in making a claim – unless the tribunal decides your employer has behaved so unreasonably in the tribunal that they’ll award you costs on top of compensation.

As you can tell, it’s complicated! That’s why specialist employment lawyers – like us – can help. Give us a call and we’ll be happy to advise you. The initial conversation is free.

And there’s more…

On benefits?

If you got any welfare benefits after you lost your job, the tribunal will deduct that amount from your compensation, except for:

• Housing benefit
• Payments you received to help pay your council tax
• Welfare benefits which are not income-related, such as Personal Independence Payment, Disability Living Allowance and Attendance Allowance
• Welfare benefits you got before your dismissal or after the tribunal hearing
• Tax credits

If you reach a settlement before the tribunal hearing, your employer won’t be asked to repay any welfare benefits you’ve received. This might encourage them to settle your claim rather than go to the tribunal.

Did your employer follow the right process?

If your employer failed to follow the ACAS Code of Practice on disciplinary and grievance procedures, the employment tribunal might increase your compensatory award by 10% to 25% (unless you were dismissed by reason of redundancy or sickness).

If your employer failed to give you a written statement of your terms and conditions of employment, the tribunal can also award you an extra 2 or 4 weeks’ pay.

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 specialist employment lawyers, we’ll help you with every stage, from negotiating with your employer to reaching the settlement agreement (or compromise agreement in Northern Ireland) or taking your case right through to the employment tribunal.

Every situation is different, so let’s start with an informal chat about yours. Remember, the initial call is free.

“Paul Doran Law is not just a law firm; they are trusted colleagues. You can be confident that, however sensitive or traumatic your case, they will handle every detail with care and compassion. I would 100% recommend them.”
Lorraine

Related reading: How is unfair dismissal compensation calculated?

• How much compensation can I get for disability discrimination?
• Can I get compensation for victimisation?
• Is my compensation free of tax?

Need help? How is unfair dismissal compensation calculated?

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February 20, 2018 at 5:07 pm
Category: Blog

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