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New compensation limits announced

New compensation limits announced EMPLOYMENT LAW

The Employment Rights (Increase of Limits) Order 2017 has been laid before Parliament and will come into force from 6 April 2017. The Order increases the limits applying to certain awards of employment tribunals and to other amounts payable under employment legislation. The main changes are:

  • Maximum amount of a “week’s pay” which is used for the purposes of calculating statutory redundancy payments, the unfair dismissal basic or additional award and payments to employees in the event of insolvency – increases from £479 to £489.
  • Limit on the amount of the unfair dismissal compensatory award – increases from £78,962 to £80,541 (there is an additional cap of one year’s salary on the unfair dismissal compensatory award).
  • Limit on the daily amount of statutory guarantee payment – increases from £26.00 to £27.00.

The increases apply where the event giving rise to the entitlement to compensation or other payment occurs on or after 6 April 2017. The appropriate date is determined differently depending on the type of claim brought. In unfair dismissal claims, this date is the effective date of termination of employment. Where the appropriate date falls before 6 April 2017, the old limits will continue to apply.

The increases reflect an increase of 2.0% in the retail prices index from September 2015 to September 2016.

The Order does not apply to Northern Ireland, which sets its own increases.

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