Despite all the tabloid headlines criticising 'huge payouts' to ex-employees who take their ex-employer to a tribunal, in reality most awards are relatively modest, especially when compared with the legal costs, tribunal fees, stress, anxiety, lost time and energy sucked up by the process. Even if you succeed in your claim, your employer may appeal to a higher court. In 2018-19, the median award for unfair dismissal was £6,243.
For discrimination claims, there is no upper limit and the compensation normally includes an element to cover injury to feelings. Again, most awards are much lower than claimants often expect. For example, the median award for a claim for sex discrimination in 2018-19 was £6,498.
For wrongful dismissal in the employment tribunal (a claim that the employer breached the employment contract by failing to give the correct (or any) notice), the upper limit is £25,000. (There is no cap if, instead of using the employment tribunal, you bring your contract claim in the civil courts).
Compensation for unfair dismissal is made up of a basic award, based on your age and length of service, and a compensatory award, which is supposed to compensate you for the on-going financial losses that result from your dismissal. The basic award is worked out based on a ‘week’s pay’ that is ‘capped’. This cap is reviewed each year and is currently set at £538 (from April 2020).
The compensatory award is currently capped at the lower of 52 weeks' pay or £88,519 (from April 2020). As already explained, most awards come nowhere near this cap.
If you have got a new job, your compensation will be cut to take account of what you have been paid by your new employer. However, the compensation will reflect other losses, such as loss of pension rights.
Your compensation can also be cut if the tribunal decides that even if the employer had acted fairly, you would probably still have been dismissed, either straightaway or in the future. This is known as a ‘Polkey’ deduction, after a well-known case, Polkey v A.E. Deyton Services Limited .
Your compensation can also be cut if the tribunal decides that your own behaviour contributed to the employer’s decision to dismiss you.
Employers can be made to pay more compensation if they failed to follow the Acas Code of Practice on Disciplinary and Grievance Procedures (PDF, 167KB). Similarly, your compensation can be reduced if you unreasonably failed to co-operate and raise concerns internally in the way suggested by the Acas Code.