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Compensation for Unfair Dismissal – Part 2 The Compensatory Award

Compensation for Unfair Dismissal – The Compensatory Award

Part 2 of our series of articles about compensation for Unfair Dismissal deals with the compensatory award.

Once the Employment Tribunal has decided on the amount of Basic Award they will look at the compensatory element of your claim.

This is the part of your compensation that is designed to compensate you for the loss of earnings that you have suffered. The idea being that you will, financially, be in the position you would have been had you not been dismissed.  It is therefore based wholly on your economic loss and will not give you compensation for the way that you have been treated.

You should also note that ultimately the amount of compensatory award you receive is down to the discretion of the Employment Tribunal.

The Compensatory Award can be broken down into Past and Future Loss.

Past loss of earnings

This will include all wages, benefits such as car allowance, and pension from the date that your employment ended until the date of the Employment Tribunal decision.

Future loss of earnings

This will also include all wages, benefits and pension but will be from the date of the Employment Tribunal decision until a point in time that the Tribunal consider to be reasonable in the circumstances.

Calculating loss of earnings

The calculation for your loss of earnings is based on your net pay, i.e. the pay you receive after deductions for tax and national insurance. It should also be based on what you would have been earning had you not been dismissed. So if you were due to receive a pay rise that would have become effective after your dismissal then you can claim this amount as your pay, rather than the rate of pay prior to your dismissal.

You may also be able to claim for a lost bonus or your commission if this would have been due to you after the date of your dismissal. This will of course depend on the terms of the bonus/commission payments and whether there was a reasonable expectation that you would have received the payment. The more evidence that you have in this regard the better as the Employer is likely to argue that you would not have received the payment.

Ultimately again it is up to the Employment Tribunal to decide the amount that you will receive.

Loss of benefits

As well as your wages, bonus and commission you are able to recover compensation for your lost benefits. This can include:

  • Company car
  • Medical insurance
  • Health insurance
  • Private mobile/telephone use
  • Gym membership

Essentially any benefit that you received from your Employer as a result of your employment.

It will be necessary to calculate the financial value of these benefits on a weekly basis and in most cases it should be easy to do by carrying out some research and/or making enquiries with the provider of the benefit as to the cash value or the equivalent cost if you were to pay for it yourself.

Cap on Compensatory Award

There is currently a cap on the total amount of compensatory award that you can receive which is £74,200 (as at the 1st February 2013). This means that you cannot receive more than £72,400 in compensation for loss of your earnings.

For those who were on a relatively high salary this can mean that even if successful with your claim you may not recover your full lost earnings.

Claims with no cap on compensation

If you are successful in claiming that you were dismissed for one of the reasons set out below the statutory cap of £72,400 will not apply and the Employment Tribunal can award you your full loss.

The reasons are:

  • You have been dismissed for making a protected disclosure i.e. whistleblowing
  • You have been dismissed for a health and safety reason
  • You have been made redundant and the reason you were selected is because of a protected disclosure or a health and safety reason
  • If you claim discrimination then there will be no cap on the compensation (see discrimination compensation)


  1. A was earning £500 per week after deductions. He had no other benefits or payments.

He has not been able to get a job up to the date of the Employment Tribunal hearing which takes place 20 weeks after he is dismissed.

A claims that it is likely to take him a further 6 months at least to get another job because of the local economy and type of work he does.

Past loss = 20 x £500        = £10,000

Future loss = 26 x £500   = £13,000

The total A is claiming for compensation is £23,000.

The Employment Tribunal will make a decision on the amount of compensation A should receive based on the figures and information provided by A and his employer B.

In this case B are likely to argue that it is unreasonable for it to take A almost a year to find an new job.

This is why having plenty of evidence of the applications that you have made and about the job market is important to convince the Employment Tribunal that what you are asking for is reasonable.


  1. B was earning £450 per week after deductions. Her employer made a contribution of £30 per week to her pension and she had a Company car allowance of £150 per week.

B has been fortunate enough to find a new job before the Employment Tribunal hearing but her pay is £350 per week and she has no pension or car. B started her new job 12 weeks after being dismissed and the Employment Tribunal hearing takes place 24 weeks after she was dismissed.

B is therefore claiming:

Past loss

Past loss of earnings = 12 x £450                =£5,400

Past loss of benefits = 12 x £30 + £150     =£2,160

Continuing loss of earnings = 12 x £100                   = £1,200

Continuing loss of benefits = 12 x £30 + £150       = £2,160


Total loss up to the Employment Tribunal Hearing date = £10,920


Future loss

40 x £150              =£6,000

40 x £30 + £150  =£7,200


B claims that it she will not obtain a pay rise in her new job until she has been working there for at least a year and so claims the difference in her pay for a further 40 weeks, bringing the total amount of continuing loss she is claiming to 1 year.

As with A above B will have to show the Employment Tribunal that this is reasonable, particularly if her Employer argues otherwise.

If you need help with calculating the potential value of your Employment Tribunal claim please send us an email to:


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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.

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