Unfair dismissals to be capped at one year's salary
Awards for unfair dismissals are to be capped at one year's salary, the Government has recently announced. The measure is expected to be introduced this summer. It does not replace the maximum compensation limit, currently set at £72,400, which will still apply to people whose annual salary exceeds the limit. But an employee earning the average salary of £26,500 will not be awarded more than £26,500 when the new rules come into force.
It is hoped the change will bring more clarity to both employers and employees about what they can expect if they go on to an employment tribunal. Business groups said it would give employers more confidence with their talent management strategies.
They said that employees would no longer harbour unrealistic expectations about the compensation they might receive at a tribunal, which may in the past have encouraged them to resist a settlement. The TUC said it would deter legitimate claims and 'let bad employers off the hook'.
Analysts have pointed out that very few claimants - about one in 350 - walk away with large awards, and that the median award is under £5,000. As such, it's thought that the change will have more a 'psychological' effect than anything else.
Legal experts said that the biggest impact may be felt by older workers nearing retirement. As they are less likely to get another job, compensation for loss of earnings could be more than a year's salary under the present system, but this will not be available to them in the future.
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