As set out in The Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013, the Government has decided to limit the compensatory award for unfair dismissal to the lower of the claimant’s annual salary or £74,200 (the current statutory cap). Employees often have unrealistic perceptions about the tribunal awards they may receive and linking the cap to their earnings might lead to more realistic expectations and in turn encourage earlier settlement discussions.
There is also an argument that the new cap will go further towards striking a balance between ensuring employees are fairly compensated and creating more certainty for employers as to the likely total costs of a claim. In practice however, this new cap is unlikely to have a major impact, as the average compensatory sum awarded in unfair dismissal cases is in most cases far lower than even one year’s earnings.
The changes are expected to come into force in July 2013, although we are awaiting confirmation and will keep you updated through our blogs.
If you have any queries please contact a member of the employment team or call us on 01737 854 500 or email [email protected]