Kenny Scott highlights the key points HR needs to know about the upcoming compensation cap
From 1 January 2027, unfair dismissal will become a very different risk for employers. The reduction in the qualifying period from two years to six months has attracted most of the attention. But the quieter reform may prove more disruptive: the removal of the cap on compensatory awards.
At present, the cap gives employers, employees and advisers a known framework. It limits financial exposure and shapes settlement behaviour. That framework is about to disappear. The current upper statutory cap of 123,543 will go, along with the secondary cap of 52 weeks’ gross pay where that is lower. That changes the economics of dismissal.
For years, employers have been able to price unfair dismissal risk with some confidence. In many cases, that has encouraged settlement. In others, it has made litigation unattractive for claimants once cost, stress and uncertainty are taken into account. Remove the ceiling and both sides behave differently.
Take an employee in their early sixties earning 60,000. Under the current regime, the statutory cap often anchors settlement discussions. From January 2027, that same employee may argue that their loss of earnings could extend well beyond 12 months, particularly if finding equivalent work is difficult.
In some cases, the argument may move towards long-term or even career-long loss. For senior executives, the shift is sharper. A chief executive earning 250,000...
TikToker Camilla Alhassan Jailed 1 Year Over False Claims About Prez Mahama BBC CNN DW CGTN NBC ABC ALJazeera France24 JoyNews CitiTV Net2TV TV3 UTV DelayTV KofiTV MagrahebTV MGTV OTHERS | Movies...