If an employee has a claim for unfair dismissal only (so over 2 years employment and no other claims like discrimination or whistleblowing detriment) if successful at tribunal they would usually be awarded a basic award (equal to statutory redundancy pay) and a compensatory award for their future loss from the date of termination.
There is cap on the compensatory award of 1 year’s pay or £115,115 (whichever is the lower).
But the timing of when the cap is applied by the tribunal when working out compensation can result in some surprising outcomes….
That will depend on the level of the employee’s future loss – how long will it realistically take them to get another role at a similar level?
Employee had over 2 years employment. Terminated by employer with immediate effect. Payment of 6 months PILON (in lieu of notice pay) £75k made by employer.
The employee is then out of work for 2 years.
Their annual salary was £150k pa. Their future loss is therefore £300k.
No, the £75k would be deducted from the £300k future loss figure (because there can be no double recovery for the same period) leaving a loss balance of £225k of which the employee could claim to the cap of £115,115. So, in this situation the employee can get the maximum cap plus the PILON payment.
Employee over 2 years employment. Employment terminated by employer with immediate effect with payment of 6 months PILON (notice pay) being £75k.
The employee is then out of work for 6 months.
Their annual salary was £150k pa. Their future loss is therefore £75k.
There can be no double recovery. The PILON payment will be taken off the above loss resulting in there being zero future loss, the compensatory award would therefore be zero (basic award would still be payable).
The employee could claim unfair dismissal as above and in addition could bring a claim for wrongful dismissal for their notice pay. There can be no double recovery for the same period. If successful on both claims, and in the same way as above, they could recover notice pay as well as the compensatory award at the cap.
What happens where dismissal is unfair and wrongful, no PILON is paid and the employee gets another role/income from the termination date?
Where there has been no PILON payment, any income earnt by the employee during what would have been their notice period is ignored by the tribunal. This quirky rule allows the employee to recover payment of their notice pay even when they have suffered no loss in what would have been that notice period.
If you wish to exit your employment and secure the most favourable exit terms from your employer please contact David.
This page/article/blog is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.
