News

January 31, 2012 - Anonymous

Higher unfair dismissal payouts to be awarded from 1 February

The maximum payout that can be awarded for unfair dismissal is due to increase from 1 February, under new rules introduced by the Government.

Compensation payouts will increase in line with the retail price index (RPI), which dictates the amount payable in unfair dismissal and statutory redundancy cases. In comparison, compensation payouts dropped in 2010, following a fall in the RPI.

The changes only affect claims where the date of dismissal falls on or after 1 February 2012 and include a new maximum for a ‘week’s pay’ – used to calculate the basic award in unfair dismissal cases – of £430 up from £400. The maximum unfair dismissal compensatory award is also set to rise from £68,400 to £72,300.

Under current law, employees must have been with their employer for at least one year before they are entitled to instigate a claim, but from 6 April 2012 this will be increased to two years. The change will apply only to staff that join a company from 6 April 2012.

The changes coincide with a government shake-up of the rules surrounding unfair dismissal claims, designed to “ease the burden on the employment tribunal process”, according to Whitehall.

Official sources have said that the increase in the qualifying period will “provide more time for employers and employees to resolve difficulties and give employers greater confidence in taking on people”.

Business Secretary Vince Cable said: “Businesses tell us that unfair dismissal rules are a major barrier to taking on more people. So we have announced that only after working for the same employer for two years can an employee bring an unfair dismissal claim.”

Typical reasons for unfair dismissal cases against small firms include poor performance management by employers as well as unfair selection for redundancy and inadequate notice periods, according to the Chartered Institute of Personnel and Development.