Last reviewed 10 March 2022

Employment tribunal claims can be costly affairs in both time and money. From dealing with the matter internally, perhaps through a grievance procedure, to responding to tribunal paperwork, engaging representation, preparing for a case and attending tribunal, it all adds up. This is time better spent on the business and is best avoided at all costs.

However, some claims simply cannot be avoided, either because an internal decision has been made incorrectly, or an employee is too disgruntled to be pacified. Where a claim does go through the employment tribunal process and is found against the employer, an award (in most cases) is made. How this award is calculated is based on strict formula, and the limits are reviewed (and often increased) annually. The limits for 2022 are as set out in the Employment Rights (Increase of Limits) Order 2022, which entered the law 25 February 2022 and will come into force on 6 April 2022.

The changes for this year can be found below:

Payments                                                

From 6 April 2020

From 6 April 2021

From 6 April 2022

Limit on guarantee payments

£30

£30

£31

Limit on a week’s pay for calculating redundancy and unfair dismissal basic award

£538

£544

£571

Maximum basic award for unfair dismissal and statutory redundancy payment (30 weeks' pay subject to the limit on week's pay)

£16,140

£16,320

£17,130

Minimum basic award for dismissal on trade union, health and safety, occupational pension scheme trustee, employee representative and on working time grounds only

£6,562

£6,634

£6,959

Maximum award for unlawful inducement relating to trade union membership or activities or collective bargaining

£4,294

£4,341

£4,554

Maximum compensatory award for unfair dismissal

A year’s pay subject to max cap of £88,519

A year’s pay subject to max cap of £89,493

A year’s pay subject to max cap of £93,878

Minimum compensation for employees excluded/expelled from trade union

£10,022

£10,132

£10,628

Contract claims (if a claim for breach of contract (eg wrongful dismissal) is brought in an employment tribunal, compensation is capped at £25,000. If the claim is for more than £25,000, it can be made in the county court or high court

£25,000

£25,000

£25,000

There are a few significant points to note on these updated limits. Firstly, statutory guarantee payments are increasing for the first time in two years. Whilst the increase is not significant, as it is rising from £30 to £31, the fact it has increased at all suggests renewed confidence in employers’ ability to continue operating. Unfortunately, the likelihood of having to utilise these payments has increased since the outbreak of the conflict in Ukraine, which will have a knock-on effect on UK businesses, through sanctions impose on Russian businesses and the lack of availability of goods and services.

Another, much more significant, increase has also been made. The limit on a week’s pay for calculating redundancy and the unfair dismissal basic award has increased from £544 to £571 (usually this increase is much smaller). As a result of this, the maximum basic award for statutory redundancy payment and unfair dismissal is now £17,130, up from £16,320, making an unsuccessfully defended claim even more expensive for employers. The maximum compensatory award for unfair dismissal has increased to £93,878 or a year’s pay, whichever is lower. These increases combined mean that the most an employment tribunal could award for an unfair dismissal, totalling the maximum basic and compensatory award, has increased to £111,008.

These new limits relating to dismissal compensation will apply for any dismissals where the effective date of termination is on, or after, the 6 April 2022. Any dismissals that took place prior to this date will have the previous compensation limits applied to any award.

Employers are going to need to ensure they have a fair reason to take action against employees, are following fair procedures and are acting reasonably in all the circumstances. This was not the case for Iceland supermarkets, in Cassidy v Iceland, where for the alleged theft of a chocolate bar worth 20 pence (part of a five-piece multipack being sold for £1 per pack) they had to pay out £3,010.78 as an unfair dismissal award due to their failure to investigate the matter properly before dismissal.

It is worth remembering also that there is no maximum compensation award for discrimination. There is guidance for tribunal judges to follow, in the form of the “Vento bands” guidelines (reviewed annually by the Presidents of the Employment Tribunals in England, Scotland and Wales). It has not been announced if these will increase in April 2022 (in previous years announcements on changes of these “bands” have been in late March, to be applied from 6 April of the same year).

The “Vento bands” are used to establish part of the compensation package that is known as an “Injury to feelings” award in discrimination cases. In assessing the amount of the award, tribunal judges must bear in mind the below bands and factors personal to the claimant, such as their vulnerability, the severity of the acts and their impact on the claimant.

  • Lower Band — £900 — £9,100 (less serious cases, typically one-off occurrences).

  • Middle Band — £9,100 — £27,400 (cases that do not warrant an award in the upper band).

  • Upper Band — £27,400 — £45,600 (most serious offences such as campaigns of discrimination).

In the second ever largest disability discrimination award, the employment tribunal in Brown v Kellog Brown and Root (UK) Ltd awarded a huge £2,567,831.97 in a case of unfair dismissal and disability discrimination whereby a cancer sufferer was dismissed following an alleged breakdown in trust and confidence, and was successful in his claims for unfair dismissal, disability discrimination, harassment, victimisation and failure to make reasonable adjustments.

There is no financial barrier to employees or ex-employees wishing to make a tribunal claim, and the above figures show that pay outs for claims are getting much more expensive. The annual increase to tribunal awards, along with other factors such as reputational damage and increases to the cost of living (which may encourage employees who would not have previously contemplated a claim, to do so), means it has never been more important that to follow correct procedures to avoid being taken to tribunal.