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09:50 on Tuesday
27 January 2004

Cambridgeshire Chamber of Commerce & Industry

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Further increase in employment compensation limits


The maximum amounts which can be awarded by Tribunals in employment cases have been increased again under new Government legislation.

Employment Tribunal compensation for unfair dismissal is, broadly speaking, divided into two parts. The first part (the basic award) depends on the employee's age, length of service and gross weekly pay. The second (the compensatory award) is designed primarily to compensate the employee for his actual loss of earnings following dismissal.

Under the Employment Rights (Increase of Limits) Order 2001, both the basic and compensatory awards are set to increase.

In the case of the basic award, the maximum gross weekly salary which can be taken into account increases from 230 to 240. This increase also applies to the maximum gross weekly salary which can be taken into account when calculating a statutory redundancy payment.

As regards the compensatory award, the maximum amount of this award increases from 50,000 to 51,700. Many employers will already be adjusting to the massive 38,000 increase in the compensatory award which was introduced in respect of all dismissals taking place on or after 25 October 1999.

Employers should also be aware that, as recently as 16 January 2001, it was reported in the Times that, in what is believed to be the first decision of its kind, an Employment Tribunal has awarded an Applicant the maximum compensatory award of 50,000.

Commenting on the changes, Robert Dillarstone, Partner and Head of Employment & Employee Benefits Department at Greenwoods Solicitors, said: "The new limits will apply to all dismissals taking effect on or after 1 February 2001 and will serve as a further incentive for employers to ensure that their procedures are watertight when making important decisions regarding the future of their employees."

January 2001

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