The Employment Rights Act 1996 (ERA 1996) sets out the remedies available to claimants in cases of unfair dismissal. Where a tribunal finds that an employee has been unfairly dismissed, the tribunal may apply the following remedies in favour of the employee:
Order the employer to reinstate or re-engage the claimant
Although orders for reinstatement or re-engagement are quite rare in practice, a tribunal has the power to order an employer to reinstate or re-engage the services of the claimant. If the employer fails to comply with the tribunal’s order then the tribunal can make an additional award in favour of the claimant.
The tribunal is required to explain to the claimant the circumstances in which it may order the reinstatement or re-engagement of the claimant. The claimant will also be required to confirm if they wish such an order to be made. The tribunal can only order the reinstatement or re-engagement of a claimant if the claimant expresses a wish for such an order to be made.
Under ERA 1996 an order for reinstatement requires the employer to treat the claimant as if they had never been dismissed. This means that the claimant suffers no loss of pay, pension or other benefits. The claimant also returns to work on the same terms of employment as they had prior to the dismissal.
The tribunal must first consider whether it is appropriate to order the reinstatement of the claimant before it considers making an order for re-engagement. If the tribunal decides that it is not appropriate to make an order for reinstatement then it may consider whether it is appropriate to make an order for the re-engagement of the claimant.
An order for re-engagement requires the employer, its successor or subsidiary to engage the claimant in employment that is comparable to the job they had before the dismissal or in any other suitable employment.
Note that where a tribunal orders reinstatement or re-engagement it cannot also make a basic or compensatory award.
The basic award is a statutory award which can be calculated by multiplying the length of continuous service, age, and a week’s pay (as it was at the date of termination). The formula for calculation is as follows:
- One and a half weeks’ pay for each year of employment in which the employee was aged 41 or over at the beginning of the year.
- One week’s pay for each year of employment in which the employee was aged 22-40 at the beginning of the year.
- Half a week’s pay for each year of employment in which the employee was under the age of 22 for any part of the year.
There is a statutory cap of a week’s pay for the purposes of calculating basic award. The calculation for employees who earn less than the statutory cap on a week’s pay will be based on their actual gross weekly pay week’s pay.
If the employee’s gross weekly pay is less than the national minimum wage in force at the time then the tribunal will apply the minimum wage in calculating the basic award.
Note that a week’s pay only includes the basic pay, but does not include bonuses and overtime.
After considering basic award, the tribunal must then consider the appropriateness of making compensatory award. Unlike basic award, there is no set formula for calculating compensatory award.
Section 123 of the ERA 1996 states that compensatory award shall be “such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer“.
In determining the level of compensatory award, the tribunal will consider the loss suffered by the claimant and whether the loss is (i) a consequence of the unfair dismissal (ii) attributable to the employer (iii) just and equitable. The tribunal will look at both the past (from the date of termination to the date of the hearing) and future (from the date of the hearing to an appropriate future date) losses.
In calculating the compensatory award, the tribunal will consider losses such as:
- Loss of earnings
- Loss of bonus or commission
- Loss of benefits
- Insurance cover
- Loss of company car
- Loss of pension
Additional award for non-compliance
Pursuant to section 117(3)(b) ERA 1996, the tribunal may make an award of between 26 and 52 weeks’ pay if an employer fails to comply with an order for reinstatement or re-engagement. The additional award is not intended to serve as a compensatory award for the claimant, rather it is meant to punish the employer for failing to comply with the tribunal’s order.
However, the tribunal will not make an additional award against the employer where it was not practical for the employer to comply with the order.
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