The compensation limits on Tribunal awards will increase as of 1 February 2013.  The key changes are set out below.

Statutory Redundancy Pay

The maximum amount permitted for calculation of a week’s pay will rise from £430 to £450; the maximum entitlement to Statutory Redundancy Pay will therefore rise from £12,900 to £13,500.

Basic Award

The current maximum amount for a week’s pay will rise from £430 to £450; the maximum Basic Award will therefore rise from £12,900 to £13,500 (which would be awarded to an employee aged 61+ with 20+ years service).

Minimum Basic Award for Defined Dismissals

The minimum Basic Award a Tribunal can award for certain dismissals, i.e., those relating to certain employee representative, health and safety and working time cases, will rise from £5,300 to £5,500.

Maximum Compensatory Award

The maximum Compensatory Award a Tribunal can award in most cases of unfair dismissal will rise from £72,300 to £74,200.

The maximum total award for unfair dismissal (i.e. maximum unfair dismissal compensation plus maximum basic award) will therefore rise from £85,200 to £87,700.

What Does This Mean for Employers?

The changes will take effect on 1 February 2013 and will be applicable to dismissals taking effect on or after that date.

It is important for employers to note that:

• If an employee is given notice prior to 1 February 2013, but the notice period will expire on or after 1 February 2013, the new limits set out above will apply to that dismissal.

• If an employee is paid in lieu of notice, the effective date of termination (EDT) is the actual date, plus the amount of statutory notice applicable to the employee, i.e., one week per year of employment, up to a maximum of 12 weeks.  If the statutory notice would take the EDT to or beyond 1 February 2013, the new limits will apply (but see also our most recent employment alert How to Terminate Employment and Exercise a Payment in Lieu of Notice Clause).

Employers’ exposure in the event of an unfair dismissal claim will rise and should be factored into decision making regarding litigation or settlement strategies.