employment law

Unfair Dismissal and Unfair Dismissal Compensation

What do you need to know about unfair dismissal as an employer?

A business is only as good as the people it employs – and building a great team can take a lot of time and money.

Unfortunately things don’t always work out and you may find yourself having to decide how to deal with a team member and whether it might be time to part ways.

But before you rush in, you must understand what your legal obligations are. Otherwise you could face accusations of unfair dismissal and be forced to pay out compensation.

Solving the problem

Issues with employees can arise for all sorts of reasons, but whatever the problem you should carry out all necessary investigations as soon as possible.

To start with, try and resolve the issue informally.

If you’re unable to come to a solution or agreement through informal discussions, you should take more formal disciplinary action.

Rules and procedures


A company’s rules and procedures for handling disciplinary procedures should be outlined in a document or manual. This should be readily available so all employees and managers can access it.

You can refer to the ACAS guide for discipline and grievances at work for advice. While this guide is not legally enforceable, employment tribunals will take its provisions into account when considering cases.

Dismissing an employee should only be a last resort after you’ve exhausted all other avenues. When doing so, you’ll must follow certain steps and criteria to make sure you adhere to the law.

Fair enough? What the law says

When dismissing an employee, you need to be aware of the Employment Rights Act 1996 (ERA 1996) which makes it a statutory right for an employee not to be unfairly dismissed.

The act outlines certain provisions, such as:

• Claims for unfair dismissal can only be brought in an employment tribunal and have to be presented within three months of the termination date of employment

• To make a claim, the person must be an employee and have been dismissed

• In most circumstances, the employee must have at least one year’s continuous ser-vice for the company if they were employed before 6 April 2012, or two years if they started on or after 6 April 2012

In some cases, dismissals can be classed as ‘automatically unfair’ if the employee is exercising specific rights to do with other areas of employment law.

Examples include pregnancy, family reasons (including paternity or adoption leave) and discrimination (including protection against discrimination on the grounds of age, disability, gender, race, religion and sexual orientation).

For a dismissal to qualify as being ‘fair’, you must be able to show it was for a reason relating to the employee’s conduct, or their capability and/or qualifications for the job.

A dismissal can also be considered fair if it was due to redundancy.

If a statutory duty or restriction prohibited the employment being continued or there was another substantial reason then this can also mean that the dismissal would be considered fair.

Unfair dismissal compensation

If an employment tribunal finds you have unfairly dismissed an employee, it will decide what remedy should be ordered.

This could result in you having to give the employee his or her old job back (reinstatement) – or a job comparable to his or her old job (re-engagement) – and make up any loss of earnings since the date of dismissal. Both of these outcomes, however, are quite rare.

It is more likely you will face an order for unfair dismissal compensation, which is usually made up of a ‘basic’ and a ‘compensatory’ award.

Reflecting the fact the employee was unfairly dismissed, the ‘basic award’ is calculated by taking into consideration the employee’s gross weekly pay, their age and the length of continuous employment.

The ‘compensatory award’ makes up any financial losses the employee has suffered as a result of the unfair dismissal.

An ‘additional’ award may also be given as part of the unfair dismissal compensation. This is awarded if an order for reinstatement or re-engagement hasn’t been complied with and is typically between 26 and 52 weeks’ pay.

Occasionally, an employee claiming unfair dismissal may be able to seek an interim remedy before a decision about the case has been made.

Interim relief is only available if an employee alleges their dismissal was for a number of different, automatically unfair reasons. Not only are there strict time limits for applications for interim relief, but it will only be granted if the tribunal believes the case will result in finding the dismissal unfair.

You might be able to settle the claim before it commences, or even before the dismissal takes effect, either privately or through the assistance of ACAS. If you go down this route, the settlement agreed must still comply with one of a number of statutory provisions.

Help is at hand

At Wallace Robinson & Morgan, we can provide you with detailed and specific information about how to deal with problems with your employees and help you deal with any disciplinary or dismissal issues.

Getting it wrong can lead to claims being made to the employment tribunal and not only can infringement of the rules be costly to the business – but it can also be stressful for you as the employer.

Please contact our employment lawyers via Daniel Zakis on 0121 705 7571 or email danielzakis@wallacerobinson.co.uk.

Further reading:

The ACAS Code of Practice; difficult or problem employees (Employment Law)

Terminating an employee’s contract of employment (Employment Law)

Settlement Agreements (Employment Law)

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.