Employment e-Brief – Annual compensation increase

Thursday 20th January 2011

The Employment Rights (Increase of Limits) Order 2010 has now been published.

From 1 February 2011 there will be increases to the limits applying to certain awards of employment tribunals, and other amounts payable under the employment legislation. These figures reflect a Retail Price Index increase of 4.6% in the year to September 2010. The table below outlines the principal changes that will come into force on 1 February 2011:

Statutory ProvisionFebruary 2010 February 2011
Maximum amount of a “weeks pay” for the purpose of
calculating a redundancy payment or for various awards
including the basic award for unfair dismissal
        £380         £400
Limit on amount of compensatory award for unfair
      £65,300       £68,400
Minimum compensation awarded for exclusion or expulsion
from a trade union
       £7,200        £7,600
Limit on daily amount of guarantee payment       £21.20        £22.20
Minimum basic award for unfair dismissal or selection for
redundancy on ground related to union membership or activities
Award for unlawful inducement relating to union
membership or activities, or to collective bargaining
       £3,100        £3,300


In most cases involving dismissal, the new figures will only apply where an employee’s effective date of termination is on or after 1 February 2011. Where dismissal occurs before 1 February 2011 the 2010 rates will apply regardless of when compensation is awarded.

Whilst the changes will be welcomed by employees, by contrast, employers could face significant financial impact. The main impact will come from the maximum compensatory award that a tribunal can award for unfair dismissal which has increased to £68,400, along with the maximum amount of a week’s pay, used to calculate statutory redundancy pay and the basic award for unfair dismissal which has been increased from £380 to £400.

Now might be the time to re-visit your provisions for dealing with these issues and the protection available to your business. The Gordons team have a range of schemes to help guard against the risk of claims and to protect your bottom line.

For more information about these, or any other employment matter, please contact a member of the employment team.