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Various issues can arise when terminating employment and a number of claims can be brought by an employee who has been dismissed.

Key points

  • In addition to termination by the employer, there will be a dismissal where the employee resigns in response to a fundamental breach by the employer (constructive dismissal).
  • Dismissing in breach of contract will give rise to a claim for wrongful dismissal. Typically, wrongful dismissal claims concern a dismissal with inadequate notice.
  • Employees with more than one month of service are entitled to statutory minimum notice.
  • A payment in lieu of notice (PILON) clause allows an employer to dismiss without notice and make a payment in lieu without being in breach of contract.
  • Unfair dismissal claims can be brought by employees who have sufficient qualifying service.
  • A dismissal will be unfair if is not for a fair reason and/or the employer has acted unreasonably in treating the reason as sufficient.
  • The five fair reasons for dismissal are capability, conduct, redundancy, statutory illegality and some other substantial reason.
  • No qualifying service is required to bring an unfair dismissal claim where the dismissal is for one of the automatically unfair reasons.
  • If an employee is dismissed without following the Acas Code of Conduct: Disciplinary and Grievance Procedures, there is an increased risk of the dismissal being found to be unfair and any compensation awarded can be increased by up to 25 per cent.
  • Compensation for unfair dismissal can take the form of a basic award (based on age, pay and years of service) and a compensatory award for losses.
  • Tribunals have the power to order reinstatement or re-engagement following a successful claim for unfair dismissal.

Recent developments

April increase to compensatory awards for unfair dismissals

The Employment Rights (Increase of Limits) Order 2018 sets out the increased limits for tribunal awards which will take effect from 6 April 2018.

The limit on a week’s pay for calculating the unfair dismissal basic award will increase to £508 meaning the maximum basic award will increase to £15,240, up from £14,670.

The maximum compensatory award for unfair dismissal will also increase to £83,682 or a year’s pay, whichever is lower.

These new limits will apply for any dismissals where the effective date of termination is on, or after, the 6 April 2018. Any dismissals prior to this date will apply the previous compensation limits - see our ‘Statutory rates’ page for more details.