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The Compensatory Award in the Employment Tribunal

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The Compensatory Award

If you win your unfair dismissal case, the Employment Tribunal will give you compensation made up of a basic award and a compensatory award. S123 ERA 1996 permits the payment of a Compensatory Award as payment for loss of wages and workplace benefits from the time of your dismissal to the date when you assess your loses. This page tells you about the types of payment you can claim for a compensatory award and helps you structure your schedule of loss correctly.

The whole point of the Compensatory Award is summarised in the case of Norton Tool Co Ltd v Tewson [1973]. In addition to the Basic Award, you can claim wage loss, loss of pension benefits, loss of other benefits such as health cover or death in service benefit, and expenses in looking for a new job. There is an overall cap on the Compensatory Award which changes from year to year. There is no limit to the maximum Compensatory Award where the reason for the dismissal was that you made a Public Interest Disclosure (Whistleblowing), or made a Health and Safety complaint. There is also no limit to a Compensatory Award for discrimination.

For unpaid wages, holiday and notice pay claims the Employment Tribunal will order the difference between what you should have been paid and what was actually paid. Wages and holiday pay are usually calculated gross, but pay in lieu of notice is usually calculated net of tax and national insurance.

Calculating the Compensatory Award

The Compensatory Award takes into account:

    • Actual loss of wages
    • Future Loss of wages
    • Loss of Fringe Benefits (benefits in kind)
    • Loss of statutory rights (employment protection)
    • Loss of pension rights/contributions
    • Expenses incurred while looking for work

Actual Loss of Wages

This covers your loss of wages from the end of your notice period (or dismissal) to the date of the Employment Tribunal hearing, minus your earnings from any new job or to the start date of your new job.

  • Include any money that you received as a result of dismissal such as notice and holiday pay in the calculation.
  • Calculate the net value of your pay and benefits every week whilst you were working.
  • Multiply that figure by the number of weeks between your dismissal and the Employment Tribunal hearing.
  • Deduct any payments you received on termination from the figure in (2). This gives you your actual losses on termination.

Future Loss of Wages

Future loss is the the estimated loss after the Employment Tribunal hearing, taking into account what you have done to find a job, whether you have actually found a job and what the new job pays. This is called mitigation of loss. The Employment Tribunal usually does not award future losses of more than 12 or 18 months.

  • If you have found a new job that pays more or equivalent to what you were earning before, then future loss of wages should not be included in your schedule of loss. You should however still include the expenses you incurred in finding that job.
  • If you have found another job that pays less, work out the difference in wages between the old and the new job and estimate how long the losses will continue. You may be able to get a longer period of future loss where it is reasonable to assume that you might not work again, for example if you are just a few years off retirement.
  • You must prepare a short written statement describing what you have done about finding a new job. You should explain any problems you have faced such as the dearth of roles available in your local area for someone of your experience and training or age.
  • You must provide evidence of your efforts, so include rejection letters if you have them, and any evidence of your job applications.

The case of Daly v Northumberland Tyne & Wear NHS Foundation Trust UKEAT/0306/14/LA has useful guidance on how Employment Tribunals deal with future loss.

Loss of Fringe Benefits

If you had fringe benefits (also known as benefits in kind) as part of your terms and conditions of employment, you should claim the value of those fringe benefits in your schedule of loss. Fringe benefits include;

  • Loss of use of the company car
  • Club memberships
  • Family health schemes
  • Cheap loans
  • Clothing allowance
  • Share incentive schemes
  • Travel concessions
  • Free accommodation

The best way to value fringe benefits is to work out how much it would cost to buy that particular benefit. Benefits in kind are taxed by HMRC who would have given the benefit a notional value. Check the notional value from HMRC or from your Employer.

With regard to company cars, there is only value if your Employer allowed you to personally use the car. You can work out a rough estimate by checking how much it would cost to hire the car, and then take 50% value of the hire cost because you would have been using it for work the other 50% of the time. You could also find the tax value of the car by using HMRC’s Company Car Tax Calculator.

Loss of statutory rights

You can claim a small amount, usually around £300, for the loss of your employment rights (such as the right to claim unfair dismissal, or a redundancy payment) which build up with service.

Loss of pension rights/contributions

Employment Tribunals do not give pensions any special status in compensation. In Aegon UK Corp Services Ltd v Roberts [2009] EWCA Civ 932, the Court of Appeal said that the pension entitlement was simply part of the overall pay package, and should be assessed in the same way. Since the Employment Tribunal can compensate you for the loss of a valuable fringe benefit, you should make a claim for loss of your pension rights in your schedule of loss. The methods of claiming pension loss are different depending on the type of pension scheme in your workplace, and what your loss is likely to be.

There are two types of pension;

  • Money Purchase Schemes (or defined contribution schemes)
  • Final Salary Schemes

Money Purchase Schemes

A money purchase scheme is where you and your Employer contribute an agreed percentage of your salary into a pension pot. Here, your loss in a termination, is the loss of your Employer’s contributions. For example, if your gross weekly pay is £400.00 and your Employer contributes 5%, then you would lose £20.00 a week. If you have a new Employer who pays £5.00 a week into your pension then your ongoing loss is £15.00 a week.

Final Salary Schemes

Final salary schemes are quite valuable, and putting a value on your pension loss from a final salary scheme is quite complicated. It is also limited by the cap on the Compensatory Award. You must take advice from a solicitor or pensions adviser. Contact your pension provider or ask your Employer for help in calculating this. If they are not willing you may need to pay a pension adviser to help you. Before you pay anyone though, take a look at the third edition of the Employment Tribunals booklet Compensation for Loss of Pension Rights 2003. It is quite old but provides some useful guidance until such time as a new one is published.

Expenses incurred while looking for work

You can include your expenses incurred whilst looking for a new job such as the cost of travel for job interviews. In Camdecca Resources v Bishop (EAT/1083/98) the Employment Appeal Tribunal confirmed that the Employment Tribunal had the power to include an award to reflect the time and effort Mr Bishop had put in to finding another job. In this case the Employment Appeal Tribunal awarded £500 expenses.

Injury to feelings

You cannot claim for injury to feelings in an unfair dismissal case, even if the dismissal has caused you stress or made you ill. If you’re making a discrimination claim, you can claim compensation for injury to your feelings as well as for your financial losses.

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Updated: 16/03/2020



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