Compensatory award for unfair dismissal to be capped at a year’s pay

by Laurie Anstis on January 17, 2013

The government have today issued their response to consultation on ending the employment relationship.

The headline proposal is that the compensatory award should be limited to a maximum of twelve months pay for an employee. The existing limit on the compensatory award (£72,300, rising to £74,200 from 1 Feb 2013)  will still apply as an upper limit, so that the cap on the award will effectively be the lower of twelve months pay or £74,200.

It isn’t clear from the consultation document how that twelve months pay will be calculated – whether the limit will be based on gross or net pay, or how variable elements of pay will be treated.

The document also contains proposals for a code of practice and further guidance on the use of compromise agreements (or settlement agreements as they will become known).

Thanks to Craig Gordon for alerting me to this.