Increases Announced to UK Employment Compensation Limits & Statutory Rates of Pay

March 04, 2020

The annual increases to the compensation limits applying to certain UK employment claims have now been published and will take effect in April 2020. An Order laid before Parliament will increase 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. The statutory rates of maternity, paternity, adoption, shared parental and sick pay will also rise from April 2020.

Compensation limits

The Employment Rights (Increase of Limits) Order 2020 will come into force from 6 April 2020 and 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 2020 – the new limits apply where the relevant event giving rise to the specific claim 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 £538 – the current limit is £525.
  • The maximum compensatory award for unfair dismissal will now be £88,519 – the current limit is £86,444. Since July 2013, there has also been a separate cap of one year’s gross pay on “ordinary” unfair dismissal compensatory awards – the maximum award will therefore now be the lower of one year's gross pay and £88,519. 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 £6,408 to £6,652.
  • The limit on the daily amount of guarantee payments will increase from £29 to £30.

Various other statutory compensation limits will also increase from 6 April 2020.

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 2020:

  • From 6 April 2020, the statutory sick pay rate will increase from £94.25 per week to £95.85.
  • From 6 April 2020, the statutory rate of maternity pay, paternity pay, adoption pay and shared parental pay will increase from £148.68 per week to £151.20.

Full details are set out in the Employment Rights (Increase of Limits) Order 2020 and the Social Security Benefits Up-rating Order 2020.

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