Introduction

The annual increases to the compensation limits applying to certain UK employment claims have now been published. The maximum compensation which can be awarded by the Employment Tribunal in “ordinary” unfair dismissal claims, as well as the maximum weekly wage figure for calculating an employee’s entitlement to a statutory redundancy payment, will increase with effect from 6 April 2021. The rates of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will also rise from April 2021.

Compensation limits

The Employment Rights (Increase of Limits) Order 2021 will revise various employment compensation limits based on the increase in the retail prices index since the previous year. The changes come into effect from 6 April 2021 and the new limits apply where the relevant event – for example, termination of employment – giving rise to the specific claim per entitlement in question occurs on or after that date.

The new limits are as follows:

• A "week’s pay" for the purposes of calculating both the basic award in unfair dismissal cases and statutory redundancy payments will be capped at £544 – the current limit is £538.
• The maximum compensatory award for unfair dismissal will now be £89,493 – the current limit is £88,519. The separate cap of one year’s gross pay on “ordinary” unfair dismissal compensatory awards still applies so the maximum award will therefore now be the lower of one year's pay and £89,493. The cap on unfair dismissal compensation does not apply where the reason for dismissal was that the employee carried out health and safety activities, made a “protected disclosure” or was selected for redundancy for one of those reasons. Further compensation can also be recovered where an additional award is made because the employer has failed to comply with a reinstatement or re-engagement order.
• The minimum basic award for unfair dismissal in health and safety, employee representative, trade union and occupational pension trustee cases will increase from £6,562 to £6,634.
• The limit on the daily amount of guarantee payments will remain at £30.

Various other statutory compensation limits will also increase from 6 April 2021.

Statutory pay rates

The Government has also published increases to the statutory rates for maternity pay, paternity pay, shared parental pay, adoption pay and sick pay in the draft Social Security Benefits Up-rating Order 2021:

• From 6 April 2021, the statutory sick pay rate will increase from £95.85 per week to £96.35.
• From 4 April 2021, the rate of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will increase from £151.20 per week to £151.97.