As of 6 April 2025, the Employment Rights (Increase of Limits) Order 2025 will increase the compensation limits which apply to various Employment Tribunal awards as well as other statutory payments. These adjustments reflect the annual review based on the Retail Prices Index (RPI) and aim to ensure that compensation remains fair and relevant in the context of economic changes.

Key Changes

Limit on a Week’s Pay:

• The limit on a week’s pay, which is used to calculate statutory redundancy pay and other payments such as the basic award for unfair dismissal, will increase from £700 to £719.

Maximum Compensatory Award for Unfair Dismissal:

• The maximum compensatory award for unfair dismissal will rise from £115,115 to £118,223. In successful claims for Unfair Dismissal, employees will receive the lower of a year’s salary or the maximum statutory limit.

Minimum Basic Award for Certain Unfair Dismissals:

• In cases where a dismissal is deemed unfair due to certain reasons (including health and safety dismissals), the minimum basic award will increase from £8,533 to £8,763.

Limit on Compensatory Awards regarding Tips:

• The limit on compensatory awards regarding tips including for failure to have a written tips policy, or for failure to allocate and pay tips fairly, increases from £5,000 to £5,135.

Implications for Employers

These changes will apply where the event giving rise to the compensation or statutory payment (the effective date of termination), falls on or after 6 April 2025. For employers, these changes mean that the cost of dismissals and redundancy payments will increase. This will be particularly significant to employers having to considering redundancies after 6 April 2025, who will need to factor in these increased statutory redundancy payments for employees with over two years’ service.

Implications for Employees

For employees, the increase in tribunal award limits is generally positive. Higher compensation limits mean that employees who are unfairly dismissed or made redundant will receive more substantial financial awards. This can provide greater financial security and support during periods of unemployment.

Employees should be aware of their rights and the new compensation limits when negotiating settlements or pursuing claims. Understanding these changes can empower employees to seek fair compensation and ensure that they are adequately compensated for any unfair treatment or dismissal.

Please do not hesitate to contact a member of our employment team who will be happy to help.