If the cap fits

It’s that time of the year again! The Employment Rights (Increase of Limits) Order 2017, which increases every year in line with the retail prices index, came into force on 6 April 2017. The order will change the calculation of statutory redundancy payments and the maximum awards available by way of unfair dismissal compensationHowever, it should be noted that where the dismissal is effective before 6 April, the old limits will still apply, regardless of the date on which the compensation is awarded.

In addition, the cap on a week’s pay (for the purposes of calculating both the basic award in unfair dismissal cases and statutory redundancy payments) will be increased to £489, the current limit is £479.

Ongoing redundancies can be especially tricky, and employers should therefore double check they apply the correct rate.

Furthermore, the maximum compensatory award for unfair dismissal will be capped at £80,541, the current limit is £78,962. Employers should however keep in mind that since July 2013 there has also been a separate cap of one year’s gross pay on ‘ordinary’ unfair dismissal compensatory awards.

The cap on unfair dismissal compensation does not apply where the reason for dismissal was that the employee was carrying out health and safety activities, had made a “protected disclosure” or was selected for redundancy for one of those reasons.

The Employment Rights (Increase of Limits) Order 2017 which sets out each of the new compensation limits can be accessed at the link below.


Dominic Bonham