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New compensation limits announced

The following increased compensation limits will be effective from 1 February 2013:

  • the maximum compensatory award for unfair dismissal will increase from £72,300 to £74,200
  • the limit on the amount of a week’s pay for the purposes of calculating e.g. statutory redundancy payments and the basic award for unfair dismissal will go up from £430 to £450
  • the minimum basic award for certain unfair dismissals (dismissals for reasons of trade union membership or activities, health and safety duties, pension scheme trustee duties or acting as an employee representative) will increase from £5,300 to £5,500.

It is interesting that the increase to the compensatory award has been announced when the Enterprise and Regulatory Reform Bill contains a power to vary the way in which the award is set. The Bill proposes that the limit could be either a specified amount which is no less than the average national annual earnings (£26,000) and no more than three times this sum (£78,000); a specified number of weeks’ of an individual’s pay (which is to be no less than 52); or the lower of these two amounts. It is also suggested that the limit could be set at different rates for different businesses, meaning a lower amount for smaller businesses.

We may, therefore, see the £74,200 limit being varied next year.

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