The Government has published its response to the consultation on “ending the employment relationship”, which includes its intention to reduce the cap on the maximum compensatory award for unfair dismissal.
The Government response includes a number of proposals, but perhaps the most significant is a proposed cap on the compensatory award for unfair dismissal: The Government has confirmed that, subject to parliamentary approval, it plans a cap of 12 months’ pay of the employee concerned. This will only apply however where this amount is less than the overall cap, which is currently £72,300 but due to rise to £74,200 on 01 February 2013.
While the limit in the value of compensation will remain virtually unchanged, according to Employment Relations Minister Jo Swinson, she said the new 12-month cap would set a clear maximum liability in unfair dismissal cases.
With only one in 350 claimants currently receiving awards larger than their salaries and the (median) average being £5,000, the minister said it was important to “tackle unrealistic expectations” on compensation in tribunals that cost time and stress as well as money.
This is an angle we at QSFJG can appreciate and hope that it will help both our Claimant and Respondent clients, by keeping in mind what ‘ball park’ they are likely to be playing in. Although why there is an arbitrary cap on loss of earnings in the first place we don’t know- it seems a little unfair. If it has been decided that a maximum of 12 months wages can be recouped at Tribunal by also retaining the cap we suggest it penalises high earners. High earners may only be able to recoup a few months of wages when really they could be entitled for a full year.
The entire purpose of the compensatory award is just what it says on the tine – its aim is to put the individual back in the position they would have been had the unfair dismissal not occurred. Arguably with the cap in place this may not always happen.