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What are employees entitled to receive for unfair dismissal?

This guide was last updated in August 2011.

Employees with 12 months' service have the right to claim unfair dismissal if the dismissal was not carried out fairly.

The remedies for unfair dismissal are a basic award and a compensatory award, reinstatement or re-engagement.

Basic award

The basic award is calculated as follows (subject to a maximum of 20 years' service):

  • 1.5 weeks' pay for each complete year of service after reaching the age of 41;
  • one week's pay for each complete year of service between the ages of 22 and 40 inclusive; and
  • 0.5 week's pay for each complete year of service under the age of 22.

This calculation works backwards from the effective date of termination so that, if the employee has been employed for more than 20 years, he gets the benefit of the years which attract a higher calculation.

The week's pay is subject to a statutory maximum which is reviewed annually. If the employee has received a statutory redundancy payment, the amount of the basic award is offset by the amount of the redundancy payment received.

Compensatory award

The aim of the compensatory award is to compensate the employee for any loss of earnings and other direct losses as a result of the unfair dismissal. The award is 'such amount as the tribunal considers just and equitable in all the circumstances', having regard to the employee's loss caused by the employer's action.

The award is not limited to contractual pay and benefits. It can include expense reasonably incurred by the employee and will also include a sum for loss of statutory rights. The award is subject to a maximum amount, which is reviewed each year. The employee is under a duty to minimise his losses, so should be ready to demonstrate his attempts to find alternative employment.

If the tribunal finds that the dismissal was unfair because of the procedure followed, but that there was a chance that the employee would have been dismissed in any event, then it may reduce the compensation awarded on a percentage basis. In rare cases, a 100% reduction may be awarded. It is also possible for the tribunal to reduce the amount of the compensation awarded to take into account the employee's behaviour if that behaviour has contributed to the dismissal. This is most common for misconduct dismissals.

Re-engagement/reinstatement

Reinstatement is where the employee is given his old job back on the same terms and conditions, and with no loss of continuity of employment. Re-engagement is where the employee goes back to the employer on similar terms and conditions, but not in the same job. These remedies will not be ordered if there is no job for the employee to return to or where trust and confidence between the employer and employee has broken down.

Claims for re-engagement or reinstatement are often made by employees as a tactical move, in the knowledge that additional compensation will be paid if the employer refuses to comply with such an order.

If re-engagement or reinstatement is ordered and the employer does not comply, then the tribunal may order the employer to pay additional compensation 'having regard to the loss suffered by the employee' of between 26 and 52 weeks' pay, subject to the statutory maximum.

Orders for re-engagement or reinstatement are only made in around 1% of all successful unfair dismissal cases.

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