Increase in Employment Tribunal Compensation Limits

The Government has announced an increase in the compensation limits an Employment Tribunal can award alongside other statutory payments.

The Employment Rights (Increase of Limits) Order 2024 is the latest annual increase in compensation limits which is due to take effect from 6 April 2024. Employers should be mindful, therefore, that any dismissals taking effect on or after 6 April 2024 will be subject to the new rates where applicable.

The new rates will be as follows:

Compensation limit

Current rates

From 6 April 2024

Maximum limit on a week’s pay £643

£700

Maximum compensatory award for unfair dismissal £105,707

£115,115

Minimum basic award for specific types of automatically unfair dismissal (e.g. health & safety) £7,836

£8,533

Maximum basic award / statutory redundancy payment £19,290

£21,000

Statutory daily guarantee payments £35

£38

 

The rise in compensation and statutory payments is unsurprising as it follows the increase in retail prices index (RPI) between September 2022 and September 2023 of 8.9%.

For the first time, the maximum compensatory award goes above £100,000 which is a significant increase justified by inflation.

Comment

This increase in the maximum compensatory award should be noted by employers when considering the risk of unfair dismissal claims arising from dismissals or resignations on or after 6 April 2024. This being said, the compensatory award cap remains the lesser of 52 weeks’ gross pay or this new maximum.

The new limit on a week’s pay will be chiefly important in respect of any ongoing redundancy exercises being conducted by employers where any employee dismissals will, or are likely to, take effect on or after 6 April 2024. Any associated redundancy payments for said employees would need to be updated to account for the increase in the limit on a week’s pay (assuming the employee’s wage exceeds the cap).

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