A compensation award can be made up of two parts: a ‘basic’ award and a ‘compensatory’ award.
The basic award depends on how long you worked for the employer and your age, and is calculated in the same way as a redundancy payment:
- Half a week’s pay for each year that you were under 22
- One week’s pay for each year aged 22 to 40
- One and a half weeks’ pay for each year aged 41 or over
The basic award is based on a maximum weekly wage of £464 and a maximum of 20 years’ service — so the basic award cannot be higher than £13,920 (one and a half weeks’ pay at £464 for 20 years).
The employment tribunal may also make a compensatory award, to compensate you for financial loss such as loss of earnings. This is normally capped at a maximum of £76,576 or one year’s salary, whichever is lower. There is no automatic cap if the dismissal was in relation to whistleblowing or raising health and safety concerns, or if your dismissal was the result of discrimination.
Awards can be reduced in some circumstances: for example, if you have already received payments, if your conduct contributed to the problem or if you have failed to follow the correct procedure.