Section Menu

Limits on payments and awards: guidance

URN No: 08/610

Contents

•  The limits
•  Recoupment of benefit for tribunal awards
•  The awards 
•  Guarantee payments  
•  Redundancy payments 
•  Insolvency 
•  Unfair dismissal  
•  Basic award 
•  Compensatory award 
•  Additional award 
•  Breach of contract 

Introduction

Legislation provides for payments to be made to employees in certain circumstances. Employees may be entitled to guarantee payments, redundancy payments, payment by the Department for Business, Enterprise & Regulatory Reform of certain debts owed by insolvent employers, and damages for unfair dismissal. All these payments and awards are subject to financial limits, and this document gives general information about the sums payable. It is not intended to be a complete or authoritative statement of the law.

Under the legislation, the Secretary of State is required to vary the limits on the various awards and payments mentioned above in line with the movement of the Retail Prices Index using the September Index in each year as the reference point. The changes are made by order as soon as is practicable.

Further information is available from the Advisory, Conciliation and Arbitration Service (Acas).

 The limits

* There is no limit where the employee is dismissed unfairly or selected for redundancy for reasons connected with health and safety matters or public interest disclosure ('whistleblowing').

** For details of trade union membership protection rights, please see:

Union membership: rights of members and non-members

*** See also Union membership: rights of members and non-members for details of compensation awards for exclusion or expulsion from a trade union.

Recoupment of benefit from tribunal awards

Part of the compensatory award in unfair dismissal cases compensates an employee for the loss of earnings up to the date of the tribunal hearing. However, some employees may have already received unemployment benefit or income support for the same period. To avoid ‘double payment’ the tribunal will order the employer to pay a specified amount of the employee’s award to Jobcentre Plus (formerly known as the Benefits Agency).

See also:

Benefit repayment: a guide for employers required to repay state benefit previously claimed by an employee who has won an employment tribunal award

The awards

Details of the qualifying conditions employees have to meet in order to qualify for an award or payment, are described in other regulatory guidance.

Guarantee payments

Employees may be entitled to receive guarantee payments for up to five days of lay-off in any three-month period. The maximum amount of a guarantee payment for any one day is £20.40 (£19.60 before 1 February 2008).

See also:

Redundancy payments

The amount of a statutory redundancy payment depends on the employee’s age, length of service, and the amount of a week’s pay. The maximum payment is up to 30 weeks’ pay, and the maximum amount of a week’s pay which may be used to calculate a payment is £330 (£310 before 1 February 2008).

See also: 

Redundancy entitlement statutory rights: a guide for employees

Insolvency

Employees may be entitled to payments by the Department for Business, Enterprise & Regulatory Reform of certain debts owed by insolvent employers - up to eight weeks’ arrears of pay, up to six weeks’ holiday pay, and up to twelve weeks’ pay as compensation if the employer fails to give the proper period of notice of dismissal. In each case, the maximum payment for a week is £330 (£310 before 1 February 2008).

See also Redundancy and insolvency: a guide for employees on the Insolvency Service website.

Unfair dismissal

Employment tribunals may order an employer to re-employ an employee who has been unfairly dismissed. If the tribunal does not order re-employment or if the re-employment order is not complied with, it will award compensation as described below.

The compensation awarded may be reduced by the tribunal if, for example, it is found that the employee was partly to blame for the dismissal, or that she/he has not tried to find another job in the meantime.

See also:

Basic award

The basic award compensates the employee for loss of job security. The amount of the basic award depends on the employee’s age and length of service with the employer, and the amount of a week’s pay. The maximum basic award is 30 weeks’ pay (subject to the limit on a week’s pay). In ordinary unfair dismissal cases, there is no minimum basic award. However, in the case of employees who are unfairly dismissed because of their membership or non-membership of a trade union, or because of their trade union activities, or because of activities as an employee representative or occupational pension scheme trustee, or because they have taken certain types of action on health and safety grounds or for the purposes of working time regulations, there is a minimum figure for the basic award.

Compensatory award

The compensatory award is based on the tribunal’s assessment of the employee’s loss of earnings between the dismissal and the tribunal hearing, and the likely future loss of earnings, loss of pension rights etc., up to a maximum figure of £63,000 (£60,600 before 1 February 2008). There is no limit where the employee is dismissed unfairly or selected for redundancy for reasons connected with health and safety matters or public interest disclosure ('whistleblowing').
See also:

Disclosures in the public interest: protections for workers who 'blow the whistle': guidance

Where a re-employment order is  made but not complied with, the maximum limit on the compensatory award may be exceeded if the sum of the compensatory award and additional award (see below) would otherwise be less than the arrears of pay element of the original award with which the employer failed to comply.

Additional award

If a tribunal orders the employer to re-employ the employee, and if the employer does not comply, the tribunal may make an additional award, on top of the basic and compensatory awards.

The additional award will be between 26 and 52 weeks' pay - subject to the £330 (£310 before 1 February 2008) limit on a week's pay.

Minimum 26 weeks' pay or £8,580 (£8,060 before 1 February 2008), whichever is the lower.

Maximum 52 week's pay £17,160 (£16,120 before 1 February 2008).

Breach of contract

Where an employee makes a breach of employment contract claim to an employment tribunal (or an employer makes a counter claim) the maximum amount that may be awarded in respect of that claim (for a number of claims arising from the same breach of contract) is £25,000.

See also: