Another huge change comes into force on 29th July 2013, which is often neglected by the press but will impact on a huge number of people is the new cap on unfair dismissal claims. Following consultation, the cap on unfair dismissal claims will either be the current limit of £74,200 or one year’s gross pay whichever is lesser.
The Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013 which brings in this change will apply to all dismissals after 29th July 2013. A week’s pay is calculated in the same way as set out in Chapter 14 of the Employment Rights Act (ERA) 1996.
I took part in this consultation and was personally against the introduction of a 12 month limit. Higher earners are already disadvantaged by the current cap and I felt that if such a limit was needed it should be set without any maximum at 18 or 24 months pay based on gross pay as set out in the ERA 1996. That way it is uniform across the board and does not disadvantage the higher earners or those that are older, who sadly do still find it harder (and thus longer) to secure alternative employment. The counter arguments appeared to be around the median award for unfair dismissal awards at Tribunal but this does not of course take into account settlements and compromise agreements where it was previously possible to get more than 12 months. Given the new law this is likely in my view to impact of the minds of the parties in these scenarios too. Certainly when negotiating for employees with salaries in excess of £74,200 the employer would often say well the most you can get at Employment Tribunal is that so we are only offering that take it or leave it. In my view, all employer will now have this in their mind to say you can only get a maximum of 12 months at Tribunal so we are only paying 8 months take it or leave it or similar arguments will be raised.