Many people get confused over what they are entitled to in Employment Tribunal proceedings. I have had cases where Claimants have either thought their claim was worth a lot more than it actually was or a lot less and even the occasional solicitor has not known how awards are calculated !
Not knowing what a claim is worth can lead Claimants to accepting offers that are too low or rejecting offers that they should have accepted . If employers and employees both know what a claim is likely to be worth then negotiations are much simpler and more likely to result in settlement.
A Tribunal will expect the Claimant to draft a Schedule Of Loss which sets out the value of their claim. This can be quite daunting.
If we take a straightforward unfair dismissal claim as an example, the main awards will be the Basic Award and the Compensatory Award.
The Basic Award is calculated using a similar method to statutory redundancy pay, i.e. 1 week's gross pay per complete year of service (capped at £450 for a week's pay as at February 2013), and 1.5 weeks pay (cap of £675 as at February 2013) for each complete year of service at the age of 41 or over up to a maximum of 20 years.
As the name suggests, the Compensatory Award is to compensate Claimants for loss of pay and benefits following from the unfair dismissal. The award is calculated according to pay after deductions for tax and National Insurance, and the value of benefits such as life insurance, pension contributions, company car are factored in as well.
The Compensatory Award is subject to a Claimant's duty to "mitigate" their losses, except for what would have been their notice period if they have been summarily dismissed.
"Mitigation of loss" means that the Claimant is expected to look for work to offset their losses.
"Summary dismissal" means dismissal without notice.
If a Claimant is successful, the Tribunal will award losses to the date of the Hearing plus "future losses". "Future losses" are calculated according to the period of time a Tribunal considers that, from the date of the Hearing, it would take the Claimant to find work that paid as well as the job from which they were dismissed.
The Tribunal will base "future losses" on evidence of the job market and the Claimant's attempts to "mitigate" their losses.
There is usually a statutory cap for the Compensatory Award in unfair dismissal claims, currently £68400, but this cap doesn't apply in some cases, e.g. whistleblowing and if the dismissal was for a discriminatory reason.
Example 1
If someone has been dismissed with notice or been paid notice and finds another job within what would have been their notice period and the new job pays the same or more than the job they were dismissed from, the Basic Award is pretty much all they can get because they have successfully "mitigated" their losses.
Example 2
If an employee finds another job after 6 months of being summarily dismissed, the Tribunal Award would be for the Basic Award and the Compensatory Award would be for 6 months' compensation.
Example 3
Let's say that the Claimant finds another job after 3 months of being summarily dismissed but the new job overall pays £500 per month less after deductions than the old job. In this case, the Claimant will receive the Basic Award, the Compensatory Award will be based on 3 months full compensation and then for the period after the 3 months at the rate of £500 per month.
The guiding principle for Tribunals when calculating awards is that the award has to be "just and equitable" based on the different circumstances for each case. Therefore, in some cases Tribunals may reduce the award (sometimes to zero) if it considers the Claimant has contributed to their dismissal or if the dismissal is only unfair due to a technical breach in the employer failing.
This is only intended to be a brief guide as each case turns on its own facts and the calculation of Tribunal compensation can be quite complicated.
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Disclaimer
This blog post is intended for information only. It is not intended to amount to legal advice or be relied on in legal proceedings and readers are advised to take specialist legal advice at all times.
