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Additions and Deductions From Compensation

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Addition and Subtraction of Compensation

This page takes you through the circumstances where the Employment Tribunal may increase or decrease your compensation. It also provides information on the impact of state benefits on your compensation and other deductions that may be made. This page helps you prepare your schedule of loss correctly so that you don’t lose out on money.


Increasing the Award

The Employment Tribunal will always consider whether your Employer followed its own procedures and the ACAS Code of Practice on Discipline and Grievance Procedures. If your Employer is found to be in breach of its own policies or the ACAS Code, the Employment Tribunal can increase any award by up to 25% for unreasonable failure to comply with any provision of the ACAS Code. You should include this uplift in your schedule of loss together with a statement of why you believe that your Employer has failed to comply with the ACAS Code.

Decreasing the Award

There are several arguments that your Employer can make to the Employment Tribunal which could decrease your award. Where compensation is to be reduced it is usually expressed as a percentage of the compensation award and can be as much as 100%. Your Employer can ask the Employment Tribunal for any of the following;

A. Sums already paid to you, should be deducted from the Award. For example a redundancy payment, notice payment or an ex gratia payment.

B. Any state benefits you have received should be deducted from your Compensatory Award.

C. A “Polkey Reduction” should be made.

D. The Compensatory Award should be reduced because your conduct contributed to your dismissal. This is known as Contributory Conduct.

E. That you did not make efforts to find another job. This is called Mitigation of Loss.

The Polkey Reduction

If your Employer was reasonable in dismissing you under S98 (4) ERA 1996 but did not use a fair procedure, the Employment Tribunal will reduce your compensation by a decided percentage because you would have still been dismissed if fair procedures had been followed and your Employer’s procedural errors would have made no difference to the outcome. This only affects the Compensatory Award. The Court provided guidance for this situation in the case of Polkey v AE Dayton Services Limited [1987] and a few other cases decided after it.

Contributory Conduct

In cases where your dismissal was procedurally unfair but the Employment Tribunal finds that your own conduct contributed to your dismissal your compensation can be reduced for contributory conduct. The Employment Tribunal can reduce your compensation by a decided percentage. This means that your compensation could be reduced both under Polkey and Contributory Conduct by as much as 100%, and you could end up with nothing.

The Impact of State Benefits on Your Award

Receipt of certain state benefits will affect your Compensatory Award. If you are successful at the Employment Tribunal, the value of any Jobseeker’s Allowance/Universal Credit, Income-related Employment and Support Allowance or Income Support that you received from the day you were dismissed until the date of the Employment Tribunal hearing will be deducted from your Compensatory Award. This is known as recoupment. Any benefits that you received AFTER the date of the Employment Tribunal will not be deducted. Housing Benefit (Allowance) and Council Tax Benefit are not deducted. If you conclude a Settlement Agreement with your Employer before the Employment Tribunal hearing, then you will not have to repay the benefits you received. The Employment Tribunal will make an order for your Employer to pay the full amount of compensation. Under the Employment Protection (Recoupment of Jobseeker’s Allowance and Income Support) Regulations 1996, your Employer will receive a recoupment notice from the Department for Work and Pensions 30 (DWP). The recoupment notice will order your Employer to pay back the money you received in state benefits. Recoupment orders apply when the Employment Tribunal makes an award for;

A. Unfair dismissal (including orders for interim relief.)

B. Failure to make a guarantee payment.

C. Failure to pay an Employee a protective award.

D. Failure to pay wages during medical or maternity suspension.

E. Failure to consult workplace representatives in a collective redundancy.

The Employment Tribunal will work out how much of your award is for arrears of pay, or loss of earnings up to the date of the Employment Tribunal hearing. This part of your compensation is called the Prescribed Element. This is the only part of your compensation that DWP can have. DWP will ask your Employer to pay the lesser of the Prescribed Element (after deducting Income Tax and National Insurance Contributions), or the total amount of benefits you have received for the period covered by the Prescribed Element. Your Employer will then pay you the difference between the Prescribed Element and your Compensatory Award.

Last Updated: [22/02/2022]