Employers warned of increase to compensation limits

The annual increase in the limits applying to certain Employment Tribunal awards has recently been published, and the key increases include:

• the limit on a compensatory award for unfair dismissal rises from £72,300 to £74,200;
• the maximum amount of a ‘week’s pay’ (used when calculating statutory redundancy pay or the basic award for unfair dismissal) rises from £430 to £450; and
• the maximum unfair dismissal award (basic plus compensatory) will therefore be £87,700.

It has been revealed that the increases take effect in respect of claims where the effective date of termination or other ‘appropriate date’ is on or after 1 February 2013.

These annual increases are required in order to keep Tribunal compensation limits in line with the Retail Prices Index.

Employers have been told that they should take note of these upcoming changes, particularly the quite significant jump in the compensatory award, and use the new limits when working out compensation awards from 1 February 2013.