How Much Compensation in an Unfair Dismissal Claim?

If an employee perceives their termination as unjust, they may consider tribunal proceedings. During this process, questions often arise regarding the compensation in an unfair dismissal claim. Read our guide for an in-depth analysis of this topic.

If you’re seeking assistance, explore further details about our charges.

How Much Compensation in an Unfair Dismissal Claim?

What is Unfair Dismissal?

Before delving into the specifics of compensation in an unfair dismissal claim, it’s crucial to grasp what they are. Put plainly, an unfair dismissal transpires when someone’s employment is terminated without a fair reason or due process. In reality, though, there are more points for an individual to consider before claiming compensation.

First, the individual would need to determine if they’re actually eligible to bring this type of claim. Typically, they would need to be legally classified as an employee and have two years of continuous employment. 

If this is the case, they should uncover whether a fair reason was provided or if proper procedures were adhered to. An example of an unfair reason may involve dismissing someone based on their performance when they weren’t adequately supported or trained. Meanwhile, a dismissal could be procedurally unfair if, for instance, an employer terminated someone’s employment based on a complaint of misconduct without conducting a thorough investigation first.

However, individuals must also assess whether their dismissal was ‘automatically unfair’ or involved discrimination. This becomes especially crucial in cases where individuals have been employed for less than two years. Typically, this tenure would prevent them from pursuing unfair dismissal claims because they would not meet the eligibility criteria. 

Yet, claims involving ‘automatic unfair’ dismissal or discrimination do not have such limitations. As such, they can continue legal proceedings in search of a remedy. An example of an automatically unfair reason includes dismissal due to pregnancy.

If you would like to learn more about the eligibility for unfair dismissal claims, read our complete, practical guide on unfair dismissals now.

The Compensation in an Unfair Dismissal Claim

If an employment tribunal rules in an employee’s favour, they may be granted reinstatement, re-engagement or, most commonly, compensation. Official Government statistics indicate that the average award of compensation in unfair dismissal cases from 2022-2023 stood at £12,000. The maximum award reached £184,000. 

Although caps restrict the amount a tribunal can award, factors such as discrimination can override them, as demonstrated by the aforementioned maximum figure. When a tribunal calculates compensation in an unfair dismissal claim, two key elements are taken into account. Those include a ‘basic award’ and a ‘compensatory award’.

Basic Award

The basic award is a fundamental component of a successful employee’s damages. This figure is determined based on various factors, such as an employee’s age, length of service, and gross weekly wage.

For dismissals that occurred between 6 April 2023 and 5 April 2024, the basic award would be calculated as follows. The lower of an employee’s gross weekly pay, or £643, would be multiplied by their service length, capped at 20 years. The total would then be multiplied by a factor of 0.5 if they are under 22, 1 if they are between 22 and 40, or 1.5 if they are aged 41 or older.

If the dismissal occurred on or after 6 April 2024, the calculation remains the same, but the gross weekly pay is capped at £700. In practice, this means the maximum basic award is £700 multiplied by 20, then by 1.5, giving £21,000.

Compensatory Award

The compensatory award is the larger element of compensation in an unfair dismissal claim. It is granted to compensate for any loss of earnings and other direct losses incurred due to the dismissal. It covers past and future losses and encompasses assets like wages, pension contributions, and the use of a company car.

For dismissals between 6 April 2023 and 5 April 2024, the maximum compensatory award grantable is the lesser of an employee’s gross annual salary or £105,707. If the dismissal occurred after 5 April 2024, the maximum would be £115,115.

However, it’s crucial to note that an employee has a duty to ‘mitigate their losses’. Essentially, this entails taking reasonable steps to secure alternative employment to restore them to the position they held before dismissal. If they succeed in doing so immediately, they may not be entitled to any compensatory award.

Nevertheless, please note that an additional award is granted for an individual’s loss of statutory rights. This is a nominal figure to compensate an employee for losing their two-year service and is typically around £500-£800. 

Factors Influencing Compensation in an Unfair Dismissal Claim

While the above calculations establish the basic and compensatory awards, the final figure may vary. As such, prospective claimants should consider what factors might impact their potential compensation. If an employer doesn’t comply with the ACAS Code during dismissal, damages could be increased by up to 25%.

However, the award could also be reduced by a percentage depending on the employee’s conduct. This might occur if it’s established that the employee’s behaviour contributed to the dismissal decision. It could also unfold if the dismissal would have been justified had a fair process been followed. Moreover, if the employee failed to seek alternative employment once dismissed, their compensation could again be reduced.

Success Stories: Redmans’ Impact on Unfair Dismissal Cases

At Redmans Solicitors, we have vast employment law experience, enabling us to help employees secure a remedy following dismissal. For instance, Chris Hadrill, Partner and employment law specialist at Redmans, secured nearly £20,000 in compensation in an unfair dismissal claim.

In this case, our client worked in a family business and was suddenly dismissed for gross misconduct without explanation. When he questioned this, he was informed of “insubordination” as the reason. Despite appealing the decision, the issue remained unresolved. Fortunately, Chris effectively presented the client’s case in a one-day employment tribunal, resulting in a successful outcome and compensation award.

Elsewhere, Chris helped a client obtain £30,000 in a settlement agreement, avoiding legal proceedings altogether. This time, our client had experienced pregnancy and maternity discrimination. Her employer had decided she wouldn’t return to her previous role, opting instead for the person covering her maternity leave. 

When our client was offered a new role, she contacted us distressed about the unfolding events. Chris reassured her, explaining that she could pursue claims of discrimination as well as constructive and automatic unfair dismissal. 

After preparing a ‘without prejudice’ letter detailing our client’s potential claims, her employer agreed to settle under her terms. This included her requests for notice pay, a reference, and a tax-free settlement of £30,000.

Recent Unfair Dismissal Case Making Headlines

To provide further insight into the potential compensation in an unfair dismissal claim, we now draw attention to a recent case in the news. In Mr Carl Borg Neal vs Lloyds Banking Group, a bank manager was awarded over £800,000. This came after the tribunal held Mr Borg-Neal had been unfairly dismissed and experienced disability discrimination.

Mr Borg-Neal, who had dyslexia, worked for Lloyds Bank for 27 years. During his employment, he actively mentored young colleagues from ethnic minority backgrounds. With an unblemished disciplinary record throughout his job, a pivotal incident occurred on 16 July 2021.

During an online anti-racism training session, Mr Borg-Neal raised a question about offensive language usage within ethnic minority communities. Despite his intent to seek clarity, he inadvertently used a racially sensitive term, upsetting the trainer, Ms Osei, who was black.

He apologised for any unintended offence, but the training provider reported the incident to Lloyds Bank. This led to an internal investigation and subsequent dismissal for gross misconduct. 

Mr Borg-Neal argued that his dyslexia affected his communication, but his appeal was unsuccessful. Consequently, he pursued an unfair dismissal claim, securing an £800,000 award. Due to the element of disability discrimination, the typical unfair dismissal compensation limits were lifted.

Claim with Redmans

We hope this guide has answered your questions about compensation in an unfair dismissal claim. If you have any further questions or want help navigating through the legal process, contact Redmans Solicitors now. We are employment law specialists and have assisted several employees in securing compensation.

So, to begin your journey with us today: