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Annual increases in employment compensation limits
The Employment Rights (Increase of Limits) Order 2023 was published and annual increases in limits to Employment Tribunal compensation will take effect from 6th April 2023. It should be noted that the new rates will apply where an employee’s effective date of termination is on or after 6th April 2023.
The new rates will be as follows:
| Compensation limit | Current rates | From 6 April 2023 |
| Maximum limit on a week’s pay | £571 | £643 |
| Maximum compensatory award for unfair dismissal | £93,878 | £105,707 |
| Minimum basic award for specific types of automatically unfair dismissal (health & safety) | £6,959 | £7,836 |
| Maximum basic award / statutory redundancy payment | £17,130 | £19,290 |
For the first time, the maximum compensatory award goes above £100,000 which is a significant increase justified by inflation. In practice, the compensatory award is still capped at 52 weeks’ gross pay in cases where this amount is lower than the maximum compensatory figure.
Comment
The increase in the maximum compensatory award is significant and employers should note this increase in the context of any dismissal claims they consider may be brought in respect of dismissals or resignations on or after 6th April.
In addition, employers must ensure any redundancy payments for dismissals on or after 6th April 2023 are calculated using the new ‘week’s pay’ figure. For instance, where redundancy exercises have already commenced and are ongoing, employers will have to revisit the redundancy payments if the dismissals take effect on or after 6th April 2023 to reflect the new rates.