The Government has begun to consult on changes to the limits on Employment Tribunal awards - but in reality, how much difference will it actually make.
The limit that the Government is proposing at the moment is a limit of 1 year's pay - presumably subject to a cap. At the moment, the cap for the Compensatory Award for unfair dismissal claims is £72,300 - assuming that it is not a claim where the cap does not apply, for example if a dismissal is for a discrimination-related reason.
However, in my experience, unfair dismissal awards are seldom for more than 1 year anyway and there are a number of reasons for this. First of all, the employee is required to make attempts to mitigate (limit) their losses by looking for alternative work - which most will do anyway as they have bills to pay. Whilst this will depend on the person's skills, the job market etc., a Claimant is unfortunate if they are out of work for more than 1 year.
Often, by the time the time the Hearing takes place, the Claimant has found some work which, even if it does not pay as much as their last job, will at least bring down the value of the Compensatory Award because the Compensatory Award is calculated on the difference between the job from which the Claimant was dismissed and their new job.
If a person is earning say £25000 a year, the Tribunal would have to compensate them for 3 years plus, which is possible but unlikely in most circumstances unless, for example, the person is aged 62 and the Tribunal considers they are unlikely to find work again.
What effect will the Government's changes have?
In my view, very little. Apparently, according to the CIPD the average unfair dismissal award is £9000. Where it may have an effect is on making employers more confident to take on staff, knowing at least what the maximum compensation would be.
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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.
