Inflation kicks unfair dismissal awards upwards
Inflation affects everything of course, so why shouldn’t awards for unfair dismissal go up also? And indeed they do, in April of each year the new maximum awards are set for basic awards, statutory redundancy payments, and compensatory awards.
So on 6th April 2017 the ‘free money’ element (basic award / redundancy) becomes £14,670.00 (for an employee with 20 years’ service) and the maximum compensation element goes up to £80,541.00.
So the worst case scenario for falling foul of the unfair dismissal legislation will be awards totalling just over £95,000.00 plus legal costs, management time and damage to reputation.
Which leads me nicely on to the next noteworthy development in this area: earlier this month the Ministry of Justice launched its website of employment tribunal decisions.
Already hundreds of judgments have been published. Keen to see what was going on in the world of tribunal misery I subscribed to the free update service and my email inbox has not been the same since!
This is all – quite obviously – bad for employers who get things wrong or pay little regard to employee rights. Good for Employment Law and HR consultants? Well perhaps so.
Starting this year the date on which the maximum limit for the compensatory and basic awards changes will move from 1st February to 6th April.
The Increase Order has been laid before Parliament and on 6th April the maximum compensatory award will increase from £74,200 to £76,574 in line with inflation.
Retail Price Index linked annual increases began in 1999 when the maximum award was increased from £12,000 to £50,000. As an interesting reminder of how much inflation has eroded the value of our currency it has crept up year by year since then (with the exception of 2010 when the recession meant it reduced by £900).
The maximum amount for the statutory concept of a ‘weeks pay’ will also increase from £450 to £464 which means the maximum basic award / statutory redundancy pay will be £13,920.
So, for an employee who earns more than £76,574 per annum and has 20 years service during which they were aged 41 or over, the maximum total award will be a very considerable sum of £90,494.
For those who earn less than £76,574 and also have the most continuous service over age 41, the maximum total award will be their gross annual pay, plus £13,920.
These increases will only affect claims in which the date of termination is on or after 6th April 2014.
As always, it is important to take advice before beginning any dismissal process to ensure the dismissal is fair and will not trigger liability for compensation.