The Government has announced that the maximum Basic Award and Maximum Compensatory award in unfair dismissal claims and certain other Employment Tribunal claims is to be increased on 1 February 2013.

The weekly “maximum gross wage” that applies to the calculation of statutory redundancy payments and the Basic Award in unfair dismissal cases is to be increased by £20 from £430 to £450. This means that your gross weekly wage will be capped at this level and multiplied by the number of years’ service that you have (combined with your age). This will therefore be calculated (for example) like so for a 24 year old with 3 years’ service on 1 January 2013 earning £600 gross a week, dismissed on or after 1 February 2013:

3 * 1 * £450 = £1,350

If the employee was dismissed prior to 1 February 2013 then the calculation would be like so:

3 * 1 £430 = £1,290

There isn’t a massive difference between the two figures but the figures are updated to account for inflation (it’s approximately a 4.5% increase). Statutory redundancy payments are also calculated utilising the same method.

The maximum compensatory award has also been increased by £1,900, from £72,300 to £74,200. This is an increase of approximately 2%. However, the changes will not affect the calculation of awards in “automatic” unfair dismissal cases – these are still uncapped.

If you are dismissed prior to 1 February 2013 then you are only entitled to receive the lower Basic Award and maximum higher rate. These changes will affect the calculation of statutory redundancy payments and the Basic Award and will therefore affect the calculation of Employment Tribunal awards and, for example, the calculation of payments in a compromise agreement.

Direct 2 Lawyers (as are all other parties interested in employment law) are currently awaiting the receipt of the Government response to the consultation on decreasing the maximum award payable in Employment Tribunal claims. We’ll keep you updated on this.

Chris Hadrill, a solicitor dealing with unfair dismissal claims at Redmans Solicitors, commented that “2013 is going to be an interesting year for employment law. The Government is looking to introduce a number of changes to employment legislation, including the introduction of fees in Employment Tribunal claims, the decreasing of the maximum compensatory award and amendments to other legislation such as TUPE. We’ll have to wait and see what happens”.

Direct 2 Lawyers offer employment law advice for employees and employment law advice for employers.

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The Direct 2 Lawyers Employment Team post daily on interesting employment law cases, Employment Tribunal judgments and Employment Appeal Tribunal judgments. All of the Employment Team posts are written by qualified specialist employment lawyers

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