How to Calculate Your Potential Compensation for Unfair Dismissal

Losing your job is never easy, especially when you believe it was unjust. If you've recently been dismissed and think it wasn't fair, you're not alone; Many employees in the UK face similar situations.  

This article will help you understand how to calculate your potential compensation for unfair dismissal, so you can make an informed decision about whether to pursue a claim. 

Understanding Unfair Dismissal 

Unfair dismissal occurs when your employer terminates your contract without a valid reason or doesn't follow the correct process.  

For example, if you were dismissed without being given the proper warnings or opportunity to improve, or if the reason for your dismissal was discriminatory, you might have a case. The first step in seeking compensation is understanding whether your dismissal qualifies as unfair.  

Types of Compensation for Unfair Dismissal 

There are two main types of compensation you might receive if your claim is successful: the basic award and the compensatory award. Each serves a different purpose and is calculated differently. 

Basic Award 

The basic award is calculated based on your age, length of service, and weekly pay. It's a statutory minimum set by the government to ensure some level of compensation for unfairly dismissed employees. The formula is simple: 

• 0.5 week’s pay for each full year of service if you’re under 22 

• 1 week’s pay for each full year of service if you’re between 22 and 41 

• 1.5 week’s pay for each full year of service if you’re 41 or older 

For example, if you are 35 years old with 7 years of service and your weekly pay is £700, your basic award would be: 

1 week’s pay x 7 years of service = 7 weeks' pay = £4,900 

Compensatory Award 

The compensatory award is intended to cover the financial loss you've suffered due to the dismissal. This includes factors like loss of earnings, future loss of earnings, loss of benefits, and expenses incurred in finding a new job. There's a cap on the compensatory award, which is currently set at £93,878 or one year's gross salary, whichever is lower (as of 2022). 

To calculate your compensatory award, consider the following: 

• Loss of Earnings: Calculate your annual salary and any bonuses or commissions you would have earned. 

• Future Loss of Earnings: Estimate the time it will take you to find a similar job and calculate the loss during this period. 

• Loss of Benefits: Include the value of lost benefits such as pension contributions, health insurance, and company car. 

• Job Search Expenses: Include any costs related to finding a new job, like travel expenses or training courses. 

For instance, if your annual salary is £40,000 and you estimate it will take 6 months to find a new job, your loss of earnings would be: 

£40,000 / 2 = £20,000 

Additional Factors to Consider 

When calculating potential compensation, consider any additional factors that might influence the final amount. These include: 

• Contributory Fault: If you were partially at fault for the dismissal, your compensation might be reduced. 

• Failure to Mitigate Loss: If you haven't made reasonable efforts to find a new job, your compensation could be lowered. 

• ACAS Conciliation: Before making a claim, you'll need to go through the ACAS Early Conciliation process. This can sometimes lead to a settlement without going to tribunal. 

Making Your Claim 

If you believe you have a strong case for unfair dismissal, it's essential to act quickly. You have three months less one day from the date of your dismissal to make a claim to the Employment Tribunal.  

Calculating potential compensation for unfair dismissal can be complex, but understanding the basics can help you make an informed decision. Remember, the figures provided here are only guidelines; the actual amount you receive will depend on various factors specific to your case.  

If you need personalised advice on your unfair dismissal case, consider instructing one of our specialist employment law barristers, who can help with drafting documents, representing you in court, and advising on your next steps.