Employment Rights Bill: Compensation cap lifted
Whilst most people will now know that the proposed scrapping of the qualifying period has now been done away with, and instead the qualifying period will be reduced from 2 years to 6 months, many may have missed a small line in the Government Press Release:
“To further strengthen these protections, the Government has committed to ensure that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted”
This is a significant deviation from the current practice. Whilst we do not know how this will look, it is clear that if the cap were to be lifted employers will need to think very carefully about how this will impact them.
Currently there is a cap on ordinary unfair dismissal awards (i.e. ones without some other claim such as discrimination or protected disclosure detriment). In simple terms, the unfair dismissal cap is what you would see is:
- Basic award which is calculated in the same way as for a redundancy and with the same cap; and
- Compensatory award, which is what the Tribunal considers “just and equitable” having regard to the actual losses the employee has suffered. The current cap for the compensatory award is a years gross pay or £118,223, whichever is the lower.
The government has not specified which element or elements of the “compensation” they are planning on changing, however this could have a significant impact on employers.
We all await further information on these proposals, however this is definitely something for employers to keep in mind.
