Caps on unfair dismissal awards and statutory redundancy pay are substantially increased

In line with other increases in April of each year, such as the National Minimum Wage/Living Wage, Statutory Sick Pay and Statutory Maternity and Paternity Pay, the government have also announced increases to the limits when calculating compensation in regard to successful claims for unfair dismissal claims at the Employment Tribunal and also when calculating statutory redundancy pay.

The effective date of these changes is 06.04.2023 and are set out below:

Claims for unfair dismissal

Compensation awarded in regard to a successful unfair dismissal claim is usually made up of a ‘compensatory award’ (loss of earnings) and a ‘basic award’ (compensation for being unfairly dismissed).

The compensatory award is subject to a cap of 52 weeks actual gross pay, with an upper statutory limit. This upper limit will increase from £93,878 from last year to £105,700.

The basic award is calculated in the same way as a statutory redundancy payment and is based on the employee’s age, weekly rate of pay and length of service. The employee’s weekly pay in this regard is also subject to a cap – this cap will increase from £571 from last year to £643 per week.

Redundancy

The increase in the cap to weekly pay (as stated above) is what is used not only to calculate the basic award in regard to successful claims for unfair dismissal, but also for the purposes of calculating statutory redundancy pay. So, when calculating statutory redundancy pay, the capped level used will also increase from £571 to £643.

The increases to the caps for both the compensatory, basic and redundancy calculations are substantial and have been based on the high level of inflation in the last year.

If you would like any further information on this article, or would like to discuss your employment law and HR matters, please don’t hesitate to contact us at hello@alphr.uk and we will be delighted to help you.