New proposal to cap unfair dismissal payouts

22 August 2013

Business Secretary, Vince Cable has put forward proposals for consultation to limit the amount of compensation that a worker can be awarded at an Employment Tribunal to a maximum of 12 months salary. Mr Cable wants to introduce this new proposed cap on awards as he believes that whilst Britain already has very flexible labour markets more can be done to help small companies by reducing the burden of Employment Tribunal claims.  Although the current limit for unfair dismissal awards is £72,300.00 (excluding the basic award) very few claimants receive anywhere near that sum.  The proposal will only affect unfair dismissal awards and a cap will not apply to claims brought against employers in discrimination cases where, the payouts are unlimited. 

Mr Cable believes the latest proposals with help small businesses.  However, the proposal will apply not only to small businesses but to all employers.  Earlier on in the year, the service required to bring an unfair dismissal claim was extended from 1 year to 2 (although there are some limited exceptions to this) and there are also proposals to introduce settlement agreements making it quicker and easier to dismiss staff.  The RMT have concern that the Government is siding with employers and sending out a message that rogue employers can fire staff unfairly in the knowledge that any compensation awarded will not be significant. 

Employment law remains an ever changing area and we await the outcome of these latest proposals with interest.