The government has cut it somewhat fine in confirming the changes to compensation limits and the maximum weeks pay for the purposes of calculating redundancy payments and tribunal awards, only setting out the new law on 25 February 2022. The Employment Rights (Increase of Limits) Order 2022 sets out the increased limits and maximums which will take effect from 6 April 2022, which employment tribunals are subject to. Each year these limits are reviewed and, generally, updated in line with the retail prices index (RPI).
Notable increases include:
- Statutory guarantee pay, which is paid during a period of lay off by the employer, has increased from £30 to £31
- the limit on a week’s pay for calculating redundancy and the unfair dismissal basic award has increased significantly from £544 to £571 (usually, this increase is smaller)
- the increase to a week’s pay means the maximum basic award for statutory redundancy payment and unfair dismissal is now £17,130, up from £16,320
- the maximum compensatory award for unfair dismissal has increased to £93,878 or a year’s pay, whichever is lower.
These mean that the most an employment tribunal could award for an unfair dismissal, totalling the maximum basic and compensatory award, has increased to £111,008.
These new limits relating to dismissal compensation will apply for any dismissals where the effective date of termination is on, or after, the 6 April 2022. Any dismissals that took place prior to this date will have the previous compensation limits applied to any award.
It is worth remembering that there is no maximum compensation award for discrimination, therefore, discriminatory dismissals could lead to a higher financial penalty for your clients.
There is no financial barrier to employees or ex-employees wishing to make a tribunal claim, and the above figures shows that pay outs for claims are getting much more expensive. The annual increase to tribunal awards, along with other factors such as reputational damage and increases to the cost of living (which may encourage employees who would not have previously contemplated a claim, to do so), means it has never been more important that your clients follow correct procedures to avoid being taken to tribunal. With regards to dismissals, this means they will need to ensure they have a fair reason to dismiss, are following a fair procedure and are acting reasonably in all the circumstances.
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