Unfair dismissal is a situation where an employer terminates an employee’s contract in a manner that breaches employment law. This can happen for a variety of reasons, such as discrimination, retaliation, or simply not following the correct procedures. When an employee is unfairly dismissed, they may be entitled to compensation to make up for the loss of income and potential emotional distress caused by the dismissal. In this article, we will explore what compensation for unfair dismissal looks like and how it is calculated.
When an employee is unfairly dismissed, they have the right to make a claim to an employment tribunal. The tribunal will then decide on the appropriate amount of compensation to be awarded to the employee. The compensation awarded for unfair dismissal is made up of two main elements: the basic award and the compensatory award.
The basic award is calculated based on the employee’s age, length of service, and weekly pay. The formula for calculating the basic award is as follows:
– Half a week’s pay for each year of employment under the age of 22
– One week’s pay for each year of employment between the ages of 22 and 40
– One and a half week’s pay for each year of employment over the age of 41
The weekly pay is capped at £544 (as of 2021) and the maximum amount of service that can be taken into account is 20 years. Therefore, the maximum basic award is currently £16,320.
In addition to the basic award, employees who have been unfairly dismissed may also be entitled to a compensatory award. This award is intended to compensate the employee for the financial losses they have suffered as a result of the dismissal. The compensatory award can cover a variety of losses, including:
– Loss of earnings from the date of dismissal until the tribunal hearing
– Future loss of earnings if the employee has not been able to find alternative employment
– Loss of pension entitlements
– Loss of statutory rights (such as sick pay, holiday pay, etc.)
– Other expenses incurred as a result of the dismissal (such as job search costs)
The compensatory award is intended to put the employee back in the financial position they would have been in if they had not been unfairly dismissed. However, there are some limits to how much can be awarded. The compensatory award is subject to a cap, which is currently set at £89,493 or 52 weeks’ gross pay (whichever is lower).
It is important to note that not all employees who are unfairly dismissed will be awarded compensation. The tribunal will take into account the circumstances of the dismissal, the employee’s conduct, and any efforts made by the employee to find alternative employment. If the tribunal finds that the employee contributed to their own dismissal in some way, the compensation awarded may be reduced or even eliminated.
In some cases, the tribunal may also order the employer to reinstate or re-engage the employee instead of awarding compensation. Reinstatement means that the employee is given their job back as if they were never dismissed, while re-engagement means that the employee is given a different job within the same organization. If an employee is reinstated or re-engaged, they may also be entitled to back pay for the period between their dismissal and their reinstatement or re-engagement.
In conclusion, compensation for unfair dismissal is intended to compensate employees for the financial losses they have suffered as a result of being unfairly dismissed. The amount of compensation awarded will depend on the employee’s age, length of service, and weekly pay, as well as the financial losses they have incurred. However, there are limits to how much compensation can be awarded, and not all employees who are unfairly dismissed will be entitled to compensation. If you believe you have been unfairly dismissed, it is important to seek legal advice to understand your rights and options for seeking compensation.