In the world of employment law, unfair dismissal is a serious issue that can have significant consequences for both employees and employers. When an employee is dismissed from their job in an unjust or unreasonable manner, they may be entitled to seek compensation through an unfair dismissal claim. However, not all unfair dismissal claims are successful, and even when they are, there is a limit to the amount of compensation that can be awarded. This limit is known as the current cap on unfair dismissal compensation.
The current cap on unfair dismissal compensation is set by the government and is subject to change over time. As of 2021, the maximum amount of compensation that can be awarded in an unfair dismissal claim is £88,519. This cap applies to all unfair dismissal claims, regardless of the circumstances of the case or the amount of loss suffered by the employee.
The purpose of the current cap on unfair dismissal compensation is to provide a sense of fairness and consistency in the resolution of unfair dismissal claims. Without a cap, there would be no limit to the amount of compensation that could be awarded, which could result in excessive payouts and financial hardship for employers. By setting a cap, the government aims to strike a balance between compensating employees for their losses and protecting employers from unduly harsh financial burdens.
It’s important to note that the current cap on unfair dismissal compensation only applies to the compensatory award, which is designed to compensate the employee for their financial losses as a result of being unfairly dismissed. In addition to the compensatory award, an employment tribunal may also award a basic award, which is calculated based on the employee’s length of service and age. The basic award is not subject to the cap on unfair dismissal compensation and is paid in addition to any compensatory award.
In some cases, an employment tribunal may also award an additional amount known as a ‘Polkey’ award, which is intended to compensate the employee for the loss of a chance to have avoided dismissal if the employer had followed a fair procedure. Like the basic award, the ‘Polkey’ award is not subject to the cap on unfair dismissal compensation and is paid in addition to any compensatory award.
While the current cap on unfair dismissal compensation provides a clear limit on the amount of compensation that can be awarded, there are some exceptions to this rule. In cases where an employee has been unfairly dismissed as a result of discrimination, whistleblowing, or other protected characteristics, there is no cap on the amount of compensation that can be awarded. This is because these types of dismissals are considered to be particularly egregious and warrant a higher level of compensation.
In addition to the cap on unfair dismissal compensation, there are also other limits and restrictions that apply to unfair dismissal claims. For example, employees must have been employed for a minimum period of time in order to bring a claim for unfair dismissal. This period is known as the ‘qualifying period’ and is currently two years for employees who started their employment on or after 6 April 2012.
Furthermore, employees must also adhere to strict time limits when bringing a claim for unfair dismissal. In most cases, employees have three months from the date of their dismissal to lodge a claim with the employment tribunal. Failure to do so may result in the claim being dismissed, regardless of the merits of the case.
Overall, the current cap on unfair dismissal compensation plays a crucial role in ensuring a fair and balanced resolution to unfair dismissal claims. By providing a clear limit on the amount of compensation that can be awarded, the cap helps to prevent excessive payouts and financial hardship for employers while still allowing employees to seek redress for their losses. While there are exceptions to the cap in certain circumstances, the overall aim is to strike a balance between the rights of employees and the responsibilities of employers in the realm of unfair dismissal.