The Government today moved one step closer to bringing into force a change to the cap on compensatory awards in unfair dismissal claims.

It has published a draft Order which limits the compensation available to an employee claiming unfair dismissal (without any complicating factors, such as whistleblowing) to the lower of £74,200 (which is the current cap) and one year's pay. A year's pay will be calculated by reference to the average pay that the employee earned in a specific period prior to the termination of their employment.

The Government considers that the pay base cap will "provide more certainty for both employees and employers". It is expected that the change to the cap will take effect some time in July 2013 (although this has not yet been confirmed), and will apply to dismissals that take effect after that date.

Employers will no doubt be considering the impact of these changes on any planned dismissals.