Unfair dismissal is a situation in which an employee is terminated from their job for reasons that are considered to be unjust or discriminatory. When an individual believes that they have been unfairly dismissed, they have the right to seek compensation through an employment tribunal. The compensatory award that may be granted in cases of unfair dismissal is designed to provide financial support to the employee who has suffered loss as a result of their dismissal. In this article, we will explore the concept of unfair dismissal compensatory awards and how they are calculated.
In the United Kingdom, unfair dismissal is governed by the Employment Rights Act 1996. The Act sets out the rights of employees in relation to dismissal, including the right to claim compensation if they believe that they have been unfairly dismissed. When determining whether a dismissal is unfair, employment tribunals will consider a number of factors, including whether the employer had a valid reason for dismissing the employee and whether they followed a fair procedure in doing so.
If an employment tribunal finds that a dismissal was unfair, they may award compensation to the employee in the form of a compensatory award. The purpose of the compensatory award is to put the employee back in the financial position that they would have been in if they had not been unfairly dismissed. This can include compensation for loss of earnings, benefits, and pension contributions, as well as any other financial losses suffered as a result of the dismissal.
Calculating the amount of a compensatory award can be a complex process, as it involves taking into account a number of different factors. The tribunal will consider the employee’s age, length of service, salary, and future job prospects when determining the amount of compensation to be awarded. They will also take into account whether the employee has mitigated their loss by actively seeking alternative employment.
In addition to the compensatory award, employment tribunals may also award a basic award to employees who have been unfairly dismissed. The basic award is calculated based on the employee’s age, length of service, and weekly pay, and is subject to a maximum limit which is reviewed annually. The basic award is designed to provide compensation for the employee’s loss of job security and is separate from the compensatory award.
It is important to note that there are limits on the amount of compensation that can be awarded in cases of unfair dismissal. The maximum compensatory award that can be awarded by an employment tribunal is currently £89,493 or 52 weeks’ gross pay, whichever is lower. This limit is in place to prevent excessive awards and to ensure that compensation is awarded fairly and proportionately.
In some cases, employment tribunals may also consider making an additional award known as a “Polkey award”. A Polkey award is made when the tribunal believes that the employee would have been dismissed even if a fair procedure had been followed. The purpose of a Polkey award is to compensate the employee for the employer’s failure to follow a fair process, even if the ultimate decision to dismiss was justified.
Overall, unfair dismissal compensatory awards play a crucial role in ensuring that employees are protected from unjust treatment in the workplace. By providing financial compensation to employees who have been unfairly dismissed, tribunals help to uphold the rights of workers and encourage employers to follow fair and transparent procedures when making decisions about dismissal. If you believe that you have been unfairly dismissed, it is important to seek legal advice and consider making a claim for compensation through an employment tribunal.