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Settlement Agreements and Compensation Limits

Details of the annual review of compensation limits have been published this week. The new limits shall take effect from 6 April 2014 and will only apply where the event giving rise to compensation occurs on or after that date. This means that, for example, where a dismissal took place before 6 April 2014 then the old rates will apply even if the Tribunal hearing, and therefore the award for compensation, falls after that date.

Notable increases include:

Award type

Old rate
(pre 6 April 2014)

New rate
(post 6 April 2014)

Statutory Limit on a ‘week’s pay’

This is used as a cap on the amount of a week’s pay for calculating awards for statutory redundancy, and the basic award for unfair dismissal.

£450

£464

Maximum compensatory award for Unfair Dismissal

Please note that there is also another alternative limit of one year’s salary.

£74,200

£76,574

Statutory Guarantee Payment

This is a payment that an employee may be eligible to if they are not provided with work for any complete day during which they would normally be required to work under their contract.

£24.20

£25

Unfair Dismissal Basic Award

This relates to awards where a dismissal is unfair by virtue of health and safety, employee representative, trade union, or occupational pension trustee reasons.

£5,500

£5,676

These changes will give new considerations for anybody considering a settlement agreement. In particular, the limit of one years salary will be a major consideration for anybody thinking of bringing unfair dismissal claims as opposed to entering into a settlement agreement.

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