Understanding the Polkey deduction
If an award to a claimant is made in an unfair dismissal case, it usually consists of two elements: a basic award and a compensatory award. The basic award is based on pay, age and years of service, and the compensatory award covers the financial loss relating to the dismissal. Both are subject to limits and potential deductions. One of the most common deductions to compensatory awards is called the Polkey deduction (or reduction). But what is it, how is it calculated and when might it come into play?
A Polkey deduction can occur when an employer has been found to have acted unfairly in dismissing an employee by failing to follow correct procedure. For example, an employer may have neglected to investigate a matter properly, may have acted without consultation, or failed to give an employee a chance to appeal. Such failures very often lead to a finding of unfair dismissal. It's not a defence for employers to argue it would have made no difference in the outcome if they had followed procedure.
However, if the tribunal decides that the employee may have been dismissed anyway, they can reduce the compensatory award according to that likelihood as a percentage deduction. So, if they think a dismissal was absolutely inevitable, the compensatory award would be reduced by a full 100 per cent.
The deduction is named Polkey after the claimant in the case that the principle was first established.
Employers will always be in a stronger position if they correctly follow procedures for dismissal, given in the Code of Practice - Disciplinary and grievance procedures [1Mb]. It's better still to try to resolve disputes before they reach an employment tribunal. Acas provides Mediation and Pre-claim conciliation services, and will work with employers and employees to find a solution that's acceptable to both parties. Acas also offers practical training courses in Conflict management and Negotiating skills to help your organisation improve workplace relations.
Visit the Acas Training and Business Solutions area for more information.