The unfair dismissal cap is the statutory maximum compensation for wrongful job termination in the UK, currently £89,449 (or 52 weeks' gross pay, whichever is lower). The cap applies to basic and compensatory awards but excludes injury-to-feelings awards in discrimination cases.
The Employment Rights Act 1996 sets the cap, adjusted annually for inflation. Tribunals calculate compensation using the lower of:
For example, an employee earning £100,000 yearly would have their cap set at £89,449, not £100,000.
| Type | Subject to Cap? |
|---|---|
| Basic Award | Yes |
| Compensatory Award | Yes |
| Injury-to-Feelings Award (discrimination) | No |
Note that redundancy payments and personal injury claims are separate.
Many assume the cap applies uniformly, but exceptions exist. For instance, injury-to-feelings awards in discrimination cases have no upper limit. The cap also doesn't apply to personal injury claims arising from dismissal.
In 2022, a senior executive at a financial firm was awarded £95,000 for unfair dismissal. The tribunal reduced this to £89,449 due to the cap, despite the executive's higher salary. However, if the dismissal involved age discrimination, the injury-to-feelings award could exceed the cap.
According to ACAS, most unfair dismissal claims fall below the cap. The average award in 2022 was £15,000. The cap primarily affects high-earning employees.