From 25 June, the Government has the power to reduce or increase the statutory cap on compensatory award. By summer, secondary legislation will be introduced for a new limit to apply in unfair dismissal cases. This will be the lower of the current cap of £74,200 or one year's gross pay. The calculation of 52 weeks' pay will be based on the statutory definition of 'a week's pay'. This means that the upper limit will be based on a year's gross salary (ie before tax and NICs) but that pension contributions, benefits-in-kind and discretionary bonuses will be excluded.
This development will be helpful to employers as employees are often influenced by what they read in the media about compensation and often believing in their entitlement to it without any regard to their own employment earnings and circumstances. In addition, annual changes to unfair dismissal compensatory limits will, in future, take effect on 6 April rather than 1 February.