[Updated 16/07/2024]

(Figures shown are for the 2024-25 year starting from 07/04/2024; figures in brackets are for the previous year).

There are many valid reasons why an employer may dismiss an employee fairly. The topic covers points when an individual is dismissed unfairly such as when the alleged reason is demonstrably false, the procedure used was unfair or the decision to dismiss was in breach of employment rights.

A Claimant must have a minimum of two years continuous service with the employer or an associated employer. There are some exceptions – see sections lower down.

The law recognises that a dismissal may be fair or unfair for a range of reasons including on grounds of:

• conduct,
• capability and/or performance,
• redundancy,
• failure to possess a qualification or contravention of a duty/restriction under a statutory requirement,
• some other substantial reason alleged for dismissal.

Besides the above reasons, a dismissal may be judged to be an ‘automatic unfair dismissal’ because of certain grounds – see the relevant section below.

If a Tribunal determines that the dismissal is unfair, the Tribunal may make an order to

• Reinstate the individual or
• Re-engage the individual or
• Award compensation under various headings and bands noted below.

Reinstatement or Re-engagement ~

A Tribunal may make an order that requires the employer to take back an employee in the same job as held before or in an alternative job. However it is recognised that may not always be practicable, for example, the employment relationship has broken down completely or that the employee contributed to the dismissal or the employee does not agree with such an order.

Reinstatement

A Tribunal may order an employer to place an individual back into his/her old job on the same terms and conditions and to pay any loss of salary/wage/pension etc. since dismissal. This is known as Reinstatement. Continuous service is treated as unbroken between the dates of the dismissal and reinstatement. The ‘compensation’ for non payment of contractual sums and benefits between the date of dismissal and the date of reinstatement is not capped.

Re-engagement

Such an order means that the employee should be given an alternative job with either the same or an associated employer. The terms of employment should be comparable to the job held before the dismissal.

Failure to Comply with an Order

If an employer refuses to comply with either an order for reinstatement or re-engagement and is not able to prove that it was not reasonably practical to do so, the Tribunal will make an Additional Compensation award of between 26 and 52 weeks pay but that is subject to the statutory limit on a week’s pay – see the relevant heading below for the current amount of compensation.

See also the heading ‘Additional Award’ lower down.

Tip – Preparing for an Employment Tribunal requires much preparation, mastering the facts and evidence and the key legal requirements to support a case. Some individuals find it stressful – a settlement via ACAS may be a more appropriate and quicker route and it is a free service – see the link to contact ACAS for early conciliation.

Financial Awards and Remedies for an Unfair Dismissal ~

Compensation is calculated as at the date of dismissal and may comprise one or more types of awards:

• A basic award,
• A compensation award,
• An additional award.

Basic Award ~ maximum £21,000 (£19,290) ~

Exception – If an individual was dismissed because of redundancy and paid redundancy pay, a Basic Award will not be made.

If the dismissal was judged to be unfair, the Claimant may be eligible for a Compensation and/or Additional Award.

A Basic Award is calculated using the same formula as for redundancy pay i.e. it is based on three factors:

• complete years of service – up to a maximum of 20 years;
• gross earnings up to the weekly statutory limit;
• a multiplier of gross pay based on three age ranges of the years of service as follows:

–  Years of service aged 41 and upwards count for one and a half week’s pay.
–  Years of service between ages of 22 and 40 inclusive count for one week’s pay.
–  Years of service aged 21 or under count for half a week’s pay.

Hence, the maximum payment of 30 weeks pay will only apply to an individual who has 20 years of continuous service from the age of 41 or older to be due 1.5 weeks pay x 20 years = 30 weeks pay. 20 years is the maximum service that can taken into account.

Examples;

a) Age 55 with 10 years service – each year attracts one and a half weeks of pay = 15 weeks pay;
b) Age 66 with 25 years service – each year attracts one and a half weeks of pay but only 20 years are counted as that is the maximum years allowed i.e. 20 x 1.5 weeks = 30 weeks pay;
c) Age 28 with 10 years service – each year of service under 22 attracts half a weeks pay and each year aged 22 or over attracts one week = 8.5 weeks pay ( i.e. 3 years x 0.5 plus 7 years x 1).

Tip – you may find it helpful to use the Calculator provided on the Government website which will give the result for redundancy pay and hence the basic award. Remember that only complete years of service count for years of service.

Reductions to a Basic Award

A Tribunal may reduce a basic award if that would be just and equitable in the following circumstances:

• the conduct of the Claimant contributed to his/her dismissal,
• the Claimant refused unreasonably to be reinstated.

There is no general minimum to the Basic Award except in cases of an automatic unfair dismissal – see below.

Automatic Unfair Dismissal – Minimum Basic Award ~

Note Minimum Basic Award = £8,533 to a maximum of £21,000. (Previous year’s range = minimum £7,836 to £19,290)

The minimum figure applies only to certain types of ‘automatic unfair dismissal’. Examples are the reasons below if directly related to:

• pregnancy or maternity or paternity leave,
• discrimination regarding a protected ground under the Equality Act,
• making a protected disclosure,
• activities of a health and safety representative,
• asserting a statutory right e.g. working hours or rest rest periods under the Working Time Regulations,
• selection for redundancy related to the above.

Tip – If a dismissal is determined to be an ‘automatic unfair dismissal’, the individual does not need to have a minimum of 2 years service for an award. Do not assume an ‘automatic unfair dismissal’ will be granted as you will need to persuade the Tribunal that your case should be recognised as such.

Compensation Award ~

Maximum award is whichever is the lower of either 52 weeks gross pay or the statutory cap of £115,115 (£105,707).

This part of an unfair dismissal award is to compensate for certain types of financial loss for having been dismissed unfairly or discriminated against. A compensatory award is broken down into sub headings of loss and set out is a document known as the Schedule of Loss. That may include some or all of the following headings of loss but will depend on the nature of the case and the particular loss suffered. Examples of headings of loss are:

• Loss of earnings, – account has to be taken of any wages from a new job and/or benefits received if unemployed etc.,
• Loss of Future earnings,
• Loss of pension benefit,
• Loss of statutory rights (usually a small fixed sum) – only applicable if the Claimant has 2 or more years of continuous service in the job from which dismissed,
• Injury to feelings (in discrimination cases for which the actual band of the award (known as Vento Bands) is at the discretion of the Tribunal),
• Failure to follow a relevant statutory ACAS Code of Practice; a 25% increase or reduction of the compensation award may be ordered depending on the facts of a case,
• Other relevant and admissible factors which may reduce or increase the award.

Within those headings, a reduction should be made for any sums received that have reduced the loss e.g. income from a new job and/or social security benefits.

The DWP may be entitled to seek recovery from a compensation award if an individual has been receiving Social Security benefits. Recovery of such sums is usually dealt with between the DWP and the Tribunal Office to adjust the award.

Tip – When preparing a Schedule of Loss for the compensation you wish a Tribunal to award to you, it is wise to enlist the the help of a friend to check your figures and help you to remember to list any income you received such as maternity pay, other benefits and then make the appropriate deduction in the figures in your Schedule of Loss.

Limit on a Compensation Award ~

The maximum is whichever is the lower of either 52 weeks gross pay or the statutory cap of £115,115 (£105,707).

However, the cap will not apply if the Tribunal determines that the dismissal was an automatic unfair dismissal such as being in connection with:

• a legitimate function of a representative for a trade union or a health and safety representative,
• a pension scheme trustee or an employee representative,
• a protected disclosure e.g. whistleblowing; the likelihood of injury in a health and safety issue; environmental damage issue

Note – Changes to the Civil Service Compensation Scheme for job losses will not occur before 2025. Over the last few years, consultation about changes has taken place and draft changes published but the final terms may not be known until 2025.

Additional Award ~

For failure to comply with a Tribunals decision that an individual should be re-engaged or reinstated, a Tribunal will make an Additional Award between a minimum of 26 weeks pay = £18,200 (£16,718) and a maximum of 52 weeks pay = £36,400 (£33,436).

Breaches of Employment Rights Other than Unfair Dismissal

For certain other breaches of employment rights, a Tribunal may make other awards which are subject to a particular monetary range or fixed award such as a failure to:

• consider a flexible working request,
• inform or consult on a TUPE transfer.

See the relevant heading in the topics list of Key HR Facts for more about those and other breaches.