As tribunal costs increase, employers urged to avoid unfair dismissals

Croner Associate Director, Paul Holcroft explains why employers should avoid tribunals by avoiding unfair dismissals.

 Although the annual April increases to employment tribunal compensation awards are expected, the ever-increasing monetary awards highlights the significant financial costs of ending up in front of a tribunal.

For dismissals effective on, or after, the 6th April 2019, the total compensatory award in an unfair dismissal claim has breached the £100,000 barrier for the first time. An unfair dismissal award payable by an employer is made up of the basic award and the compensatory award. The basic unfair dismissal award is calculated using the claimant’s age, length of service and weekly pay; with the maximum amount payable capped at 30 weeks’ pay. With the maximum amount of a week’s pay shooting up from £508 to £525 per week, the highest unfair dismissal basic award will be £15,750. If you add the new maximum unfair dismissal compensatory award of £86,444 to this amount, the total maximum cost of an unfair dismissal claim reaches £102,194. It is important to remember that there is an additional limit on the unfair dismissal compensatory award which is based on 52 weeks’ pay, i.e. if an employee is paid £30,000 each year their maximum compensatory award for unfair dismissal is £30,000, but higher paid employees will be on track for a significant pay out if they are unfairly dismissed.

For employers, these figures are a stark reminder of how much an incorrect dismissal could cost their business. Whilst many employers feel confident in relying on a potentially fair reason for dismissal, there are those who fail to take into account the importance of following a fair and reasonable procedure when ending employment. Not only could a failure to follow the ACAS Code of Practice on Disciplinary Procedures lead to a finding of unfair dismissal, it could also any compensation award increased by a further 25%. Snap dismissals decided without examining all the relevant information, or considering any evidence that mitigates the employee, will likely lead to an employment judge deciding that this decision was not within the ‘range of reasonable responses’ also.

With the importance of getting dismissals right making good financial sense, employers are encouraged to become familiar with dismissal processes and the procedure that is outlined within the ACAS Code, and their internal policy.

As a minimum, a full and thorough investigation should be carried out before a meeting, with the right to appeal any decisions afforded to the employee. Any relevant information that supports, or goes against, the dismissal needs to be considered, with the employee provided with the opportunity to review this in advance and comment on it at the meeting. Employers may need to evidence that their decision to dismiss was fair and reasonable, taking into account all the circumstances, therefore notes should be taken and a record kept of the reason for the dismissal.