What Is Unfair Dismissal?
Unfair dismissal occurs when an employee is dismissed from their job without a fair reason or without the employer following the correct procedure, as set out in UK law. The right not to be unfairly dismissed is protected by statute, specifically under Employment Rights Act 1996 Section 94, which states that employees have the right not to be unfairly dismissed by their employer.
What Makes a Dismissal "Unfair"?
A dismissal may be considered unfair if the employer does not have a valid reason for ending the employment, or if they fail to follow a fair process. Common reasons that may lead to a finding of unfair dismissal include:
- Lack of a fair reason: Employers must have a genuine and substantial reason for dismissal, such as misconduct, poor performance, redundancy, or a legal restriction preventing continued employment. If an employee is dismissed for reasons that are not legally recognised, or for no clear reason at all, this could amount to unfair dismissal.
- Failure to follow procedure: Even if there is a fair reason, employers must follow a proper disciplinary or dismissal procedure. This usually involves investigating the situation, informing the employee of the issues, giving them a chance to respond, and considering alternatives before making a final decision.
- Automatically unfair reasons: Certain reasons for dismissal are always considered unfair, such as being dismissed for pregnancy, requesting flexible working, joining a trade union, or whistleblowing.
The Importance of Fair Reason and Proper Procedure
For a dismissal to be fair, both the reason and the process matter. An employer must show not only that they had a fair reason but also that they acted reasonably in all the circumstances and followed the correct steps. Employment tribunals will look at whether the employer’s actions were within the range of reasonable responses, taking into account the size and resources of the business.
Employees who believe they have been unfairly dismissed can challenge the decision, often starting with an internal appeal and, if necessary, taking their case to an employment tribunal.
To understand more about your rights and the steps you can take if you think you have been unfairly dismissed, visit our main page on Unfair Dismissal. For a wider look at how dismissal law works in the UK, including other types of dismissal, see our overview of Dismissal Law in the UK.
Understanding what constitutes unfair dismissal is the first step in protecting your rights at work and seeking compensation if you have been treated unlawfully.
Who Can Claim Compensation for Unfair Dismissal?
Who Can Claim Compensation for Unfair Dismissal?
To claim compensation for unfair dismissal in the UK, you must meet certain eligibility criteria set out in employment law. Understanding who can claim is the first step if you believe your dismissal was unjust.
Minimum Employment Length
In most cases, you must have worked for your employer for a minimum period before you can claim unfair dismissal. For employees who started their job on or after 6 April 2012, the qualifying period is two years’ continuous service. If you started before this date, the requirement is one year.
However, there are important exceptions. If your dismissal falls under an “automatically unfair” reason – such as being dismissed for whistleblowing, pregnancy, or exercising certain statutory rights – you can usually claim regardless of your length of service.
Who Is Excluded from Claiming?
Not everyone is eligible to claim unfair dismissal. The right to claim does not apply to:
- Self-employed workers, agency staff, or freelancers – Only employees (those with a contract of employment) can claim.
- Members of the armed forces – Special rules apply to service personnel.
- Employees taking part in unofficial industrial action – Unless the dismissal is for an automatically unfair reason.
- Employees covered by a legally exempted dismissal procedure agreement – Some collective agreements may remove the right to claim unfair dismissal if they have been granted legal exemption.
- Employees who have reached the normal retirement age – If dismissed after the employer’s set retirement age, or the default retirement age (if applicable).
There are also other specific categories of workers who may be excluded. For full details, refer to the official Eligibility criteria for unfair dismissal claims on GOV.UK.
Practical Example
If you’ve worked for your employer for three years and are dismissed without a fair reason or a proper process, you are likely able to claim. However, if you have only worked for six months, you would usually only be eligible if your dismissal was for an automatically unfair reason, such as raising a health and safety concern.
Checking Your Eligibility
Because the rules can be complex and there are exceptions, it’s important to check your individual circumstances. For a detailed breakdown of eligibility and common scenarios, see our guide: Am I Eligible to Claim Unfair Dismissal?
Related Claims
Unfair dismissal is not the same as wrongful dismissal, which relates to breaches of contract rather than the fairness of the dismissal process. If you’re unsure which applies to your situation, you may find it useful to read about Who Can Claim Compensation for Wrongful Dismissal?
Understanding your rights is the first step towards getting the compensation you may be entitled to. If you think you’ve been dismissed unfairly, consider seeking advice or starting your claim as soon as possible, as strict time limits apply.
Types of Compensation for Unfair Dismissal
Types of Compensation for Unfair Dismissal
If an employment tribunal finds that you have been unfairly dismissed, it can order your employer to pay compensation. The compensation is intended to put you, as far as possible, in the position you would have been in had the unfair dismissal not occurred. There are several types of compensation awards that may be granted, each with its own rules and calculation methods. Below, we explain the main types of compensation available, how they are calculated, and how they differ from compensation for other types of dismissal.
Basic Award
The basic award is a statutory payment, similar in some ways to redundancy pay. It is calculated using a set formula based on your age, length of continuous service, and weekly pay (subject to a statutory cap). As of April 2024, the maximum weekly pay used for this calculation is £643.
The calculation is as follows:
- 1.5 weeks’ pay for each year of service after age 41
- 1 week’s pay for each year of service between ages 22 and 40
- 0.5 week’s pay for each year of service under age 22
Only up to 20 years of service can be counted. For example, if you are 45 and have worked for your employer for 10 years, all after age 41, and your weekly pay is £500, your basic award would be 10 × 1.5 × £500 = £7,500.
Certain deductions may apply, such as if you have already received redundancy pay or contributed to your dismissal.
Compensatory Award
The compensatory award is designed to cover actual financial losses resulting from the unfair dismissal. This can include:
- Loss of earnings (including salary, bonuses, and commission)
- Loss of benefits (such as pension contributions, healthcare, or company car)
- Loss of statutory rights (e.g., protection from unfair dismissal in a new job)
- Expenses incurred as a result of the dismissal (such as costs of job hunting)
The tribunal will consider what you would have earned had you not been dismissed, minus any income you have received from new employment or benefits. The aim is to compensate for losses reasonably attributable to the dismissal, but you are expected to take reasonable steps to mitigate your loss by seeking new work.
As of April 2024, the maximum compensatory award is £115,115 or 12 months’ gross pay, whichever is lower. There are some exceptions, such as dismissals for whistleblowing or health and safety reasons, where the cap does not apply.
Additional Awards
In rare cases, tribunals may make additional awards. These are usually only granted if the employer fails to comply with an order to reinstate or re-engage the employee after a finding of unfair dismissal. The additional award can range from 26 to 52 weeks’ pay, subject to the statutory weekly cap.
Aggravated or punitive damages are not commonly awarded in unfair dismissal cases. However, if an employer’s conduct has been particularly egregious or malicious, the tribunal may consider an uplift to the compensation, especially if the employer has failed to follow the ACAS Code of Practice on Disciplinary and Grievance Procedures. In such cases, compensation can be increased by up to 25%.
Unfair Dismissal vs. Wrongful Dismissal Compensation
It’s important to distinguish between unfair dismissal and wrongful dismissal. Unfair dismissal is a statutory claim based on the fairness of the dismissal process and the reason for dismissal, as set out in the Employment Rights Act 1996. Wrongful dismissal, on the other hand, is a contractual claim – typically for notice pay – where the employer has breached the terms of the employment contract.
The types of compensation and the way they are calculated differ significantly between the two. If you want to understand more about how compensation for wrongful dismissal works, see our dedicated guide on Compensation for Wrongful Dismissal.
For a broader overview of wrongful dismissal and how it relates to unfair dismissal, you may also find our section on Wrongful Dismissal useful.
In summary, compensation for unfair dismissal can include a basic award, compensatory award, and in rare cases, additional awards. The precise amount depends on your circumstances and the tribunal’s findings. If you are considering making a claim, it’s important to understand your rights and the potential compensation available.
How Is Compensation Calculated?
How Is Compensation Calculated?
If you win a claim for unfair dismissal, the employment tribunal can award compensation to cover your financial losses. In the UK, compensation is generally made up of two main parts: the basic award and the compensatory award. Here’s how each is calculated, what factors are considered, and the key steps involved in presenting your claim.
The Basic Award
The basic award is similar to a statutory redundancy payment and is calculated using a set formula based on your age, length of service, and weekly pay. The tribunal will consider:
- Your age at the time of dismissal
- Your length of continuous employment (up to a maximum of 20 years)
- Your gross weekly pay (subject to a statutory cap, which is reviewed annually)
The calculation works as follows:
- 1.5 weeks’ pay for each year of employment after your 41st birthday
- 1 week’s pay for each year of employment between ages 22 and 40
- 0.5 week’s pay for each year of employment under age 22
There are statutory limits on the weekly pay amount used in the calculation. For example, as of April 2024, the maximum weekly pay is £643. The total basic award is also capped by law.
The Compensatory Award
The compensatory award aims to put you in the financial position you would have been in if you hadn’t been unfairly dismissed. The tribunal will look at several factors, including:
Loss of Earnings
This covers the income you’ve lost from the date of dismissal up to the hearing (or until you find new work). It includes salary, bonuses, overtime, and benefits like pension contributions.
Future Loss
If you’re still out of work, the tribunal may award compensation for future loss of earnings. This is based on how long it’s likely to take you to find comparable employment.
Other Losses
You can also claim for additional losses, such as:
- Loss of statutory rights (for example, the right to claim unfair dismissal in future employment)
- Loss of benefits (e.g., health insurance, company car)
- Expenses incurred while looking for new work
Deductions
Compensation can be reduced if you didn’t try to find a new job (“failure to mitigate loss”) or if the tribunal finds that some of the dismissal was your fault (“contributory fault”). Any redundancy pay or notice pay already received will also be deducted.
Limits and Caps on Compensation
There are legal limits to how much you can be awarded:
- Basic Award: Capped according to the statutory maximum weekly pay and years of service.
- Compensatory Award: As of April 2024, the maximum compensatory award is £115,115 or 52 weeks’ gross pay (whichever is lower). These figures are updated annually.
It’s important to note that some cases – such as dismissals for whistleblowing or certain health and safety reasons – are not subject to the compensatory cap.
The Role of a Schedule of Loss
To claim compensation, you’ll need to prepare a document called a “Schedule of Loss.” This sets out in detail the financial losses you’re claiming, including calculations and supporting evidence. A well-prepared schedule helps the tribunal understand your claim and can also be used to negotiate a settlement with your employer.
For practical guidance, see our Schedule of Loss Template for Unfair Dismissal Claims. You can also find detailed advice and an example on the Schedule of Loss Template page from Citizens Advice, which explains what to include and how to present your figures.
Related Topics and Further Support
Understanding unfair dismissal compensation is just one part of employment rights. If you think your dismissal may also have breached your contract, you might want to learn about Compensation for Wrongful Dismissal, which covers different legal grounds and remedies.
Preparing your claim carefully and understanding the factors involved will help you present your case effectively and maximise your chances of a fair outcome.
How to Claim Compensation for Unfair Dismissal
Claiming compensation for unfair dismissal involves a clear process, with strict rules and time limits you must follow. Understanding each step can help you prepare a strong case and avoid common pitfalls.
Step-by-Step Guide to Making a Claim
- Try to Resolve the Issue Internally: Before making a formal claim, it’s important to follow your employer’s grievance and appeal procedures. This shows you’ve tried to resolve the matter amicably, which tribunals expect.
- Contact Acas for Early Conciliation: In most cases, you must contact the Advisory, Conciliation and Arbitration Service (Acas) to attempt early conciliation before you can submit your claim to a tribunal. Acas will try to help you and your employer reach an agreement without going to court.
- Submit Your Claim to the Employment Tribunal: If early conciliation doesn’t resolve the issue, you can make a claim to an employment tribunal. This involves completing a form (ET1) and providing details about your dismissal, why you believe it was unfair, and the compensation you are seeking. For a detailed walkthrough, see How to File an Unfair Dismissal Claim.
Time Limits for Bringing a Claim
The law is strict about time limits. You must usually submit your claim within three months less one day from the date your employment ended. For example, if you were dismissed on 1st June, you must make your claim by 31st August. Time spent in Acas early conciliation is excluded from this limit, but you should not delay.
If you miss the deadline, the tribunal will only consider your case in exceptional circumstances, so act quickly.
Evidence and Documents to Prepare
To give your claim the best chance of success, gather all relevant evidence, such as:
- Your contract of employment and staff handbook
- Letters, emails, or notes relating to your dismissal
- Records of meetings (including notes from disciplinary hearings or appeals)
- Payslips and P45
- Any written reasons for your dismissal from your employer
- Evidence of attempts to resolve the issue internally
Presenting clear, organised evidence will help the tribunal understand your case and may strengthen your position. For more tips on preparing your case, see How to Win Your Unfair Dismissal Case.
The Importance of Following Correct Procedures
Following the correct process is crucial. Not only does it show the tribunal that you acted reasonably, but failing to do so can affect the amount of compensation you receive – or whether your claim is accepted at all. Always keep records of your actions and communications.
If you’re unsure about any step, you can find comprehensive guidance at How to make a claim for unfair dismissal on the Acas website, which covers what counts as unfair dismissal, the claim process, and your rights.
Related Claims and Further Advice
Sometimes, what seems like unfair dismissal could fall under other areas, such as wrongful dismissal or discrimination. If you think your contract was breached, you may want to learn about Compensation for Wrongful Dismissal. If discrimination played a role in your dismissal, you could have additional claims.
Taking the right steps and preparing thoroughly can make a significant difference in the outcome of your case. If you need more detailed advice, consider seeking help from a legal adviser or employment specialist.
Other Important Considerations
Other Important Considerations
Dismissal from work can have wide-ranging effects beyond the immediate loss of employment. It’s important to understand your rights and options if your situation involves mental health concerns, workplace stress, or if you need to claim benefits. This section also highlights related legal claims you might consider.
Mental Health and Dismissal
If your dismissal is connected to a mental health condition, or if the experience of being dismissed has affected your mental wellbeing, you have specific protections under UK law. Employers are required to treat mental and physical health equally and must not discriminate against employees because of a mental health condition. Under the Equality Act 2010, if your mental health issue amounts to a disability, your employer must make reasonable adjustments to support you and avoid unfair treatment.
If you believe your mental health has been impacted by your dismissal or by the way your employer handled your situation, you may find it helpful to read more about your rights in the workplace in our guide to Mental Health and Work: Your Rights. For official guidance, Acas provides detailed information on Mental Health and Employment Rights, including your employer’s duty of care and what support you should expect.
Workplace Stress and Dismissal
Workplace stress is a common issue and can sometimes contribute to unfair dismissal claims. If you were dismissed after raising concerns about stress, or if your employer failed to address workplace stress that affected your health, this could be relevant in your claim. Employers have a legal responsibility to protect the health, safety, and wellbeing of their employees – including mental health. If you feel your employer did not take your concerns seriously, this could strengthen your case for unfair dismissal.
Dismissal and Claiming Benefits
Losing your job may affect your financial situation, but you may be eligible for certain benefits while you look for new work. The type of benefit you can claim depends on your circumstances, including your reason for dismissal and your previous earnings. For practical steps on what to do next and how to apply, see our guide on Claiming Benefits After Being Sacked.
Support and Further Information
Facing dismissal can be overwhelming, especially if you’re also dealing with mental health challenges or uncertainty about your rights. In addition to the resources above, you can find more information about related legal issues in our section on Wrongful Dismissal, which explains how this differs from unfair dismissal and when you might have a separate claim.
Constructive Dismissal as a Related Claim
In some cases, you might feel forced to resign because your employer’s actions made your position untenable – for example, if they failed to address bullying, harassment, or severe workplace stress. This is known as constructive dismissal. If you think your resignation was effectively forced by your employer’s conduct, you may wish to learn more about Claiming Constructive Dismissal and whether this type of claim applies to your situation.
Understanding these additional considerations can help you make informed decisions about your next steps and ensure you access the support and compensation you may be entitled to.
