Calculating Damages/Compensation in the Employment Tribunal
It is complicated working out how much money an Employment Tribunal might award you if you bring a successful claim, but it is important to ask yourself this question, and look at how compensation is calculated, before you initiate a claim.
1. Why you need to think about compensation at the start of a potential claim
It may not be worth pursuing some claims in the Employment Tribunal, even if you believe that you will be successful, if the compensation you might get is not going to be worth the time and work you would need to put into a claim. This is particularly the case when it may take a year, or even longer, to prepare the case and to get to a “final hearing” when a decision will be made. On the other hand, some claims may give rise to large compensatory awards, but it is important to be aware of information you will need to collect, to stand a chance of receiving the compensation you deserve.
Claimants sometimes have unrealistic ideas about how much money they will be awarded, often because the cases that make the news are in the news precisely because they are so unusual. Many cases are also poorly reported, so it is not clear that the award is due to certain exceptional circumstances which are unlikely to apply in other cases.
It is important that you are realistic about what you want, and how likely litigation (going to Court) is to get that result. For example, an Employment Tribunal cannot order an employer to offer you an apology, but this is something which is often very meaningful for Claimants.
You can seek some outcomes such as an apology, and/or an agreed reference, through settlement. Do look at our web page on settlement agreements including settlement via Acas (a COT3 Agreement) for further information
2. The schedule of loss
A Schedule of Loss is a key document in every Employment Tribunal claim. It is a document which is prepared by the Claimant, and submitted to the Employment Tribunal before it hears the case. It lists the losses you have incurred as a result of your employer’s unlawful treatment of you, and sets out a total value for the claim.
It is important to start preparing a thorough schedule of loss as early as you can. It is equally important that you keep a record of all evidence that may be needed to prove your losses as early as you can.
You should submit an optimistic but realistic schedule of loss. As well as helping towards negotiating a settlement, an Employment Tribunal is more likely to be persuaded to agree with something realistic, than by a schedule of loss that asks for hugely inflated amounts of money. It can damage your claim if you put in an unrealistic document, or if you suggest losses which you can’t prove.
We have set out some detailed advice on this issue below, as well as a template Schedule of Loss, and some helpful hints and tips.
Citizens Advice has a complete guide on this issue, so it is also worth checking their website.
What compensation/damages can an Employment Tribunal award?
To answer this question, you need to know exactly which claims which you are bringing, because different types of claim lead to very different types of award.
We have a web page on the types of claims which you might have in relation to caring responsibilities and your rights at work.
3. Compensation in unfair dismissal claims
Please see our detailed advice page on Unfair Dismissal.
Note that you need at least 2 years’ continuous employment to bring an ordinary Unfair Dismissal Claim.
Compensation for unfair dismissal is subject to a statutory cap or maximum (see further below), although this does not apply to dismissal related to health and safety, dismissal related to making a protected disclosure (“whistleblowing”), or a discriminatory dismissal (see further below on compensation for discrimination claims).
If you win your unfair dismissal case, the Employment Tribunal can:
- Make a declaration that you have been unfairly dismissed.
- Award compensation (money). (See further below on Basic Awards and Compensatory Awards in Unfair Dismissal claims).
- Order reinstatement or re-engagement.
Where someone who is dismissed had more than two years’ service at the date of dismissal they can also claim an amount for “loss of statutory rights”. This is to reflect the fact they will have to work in a new job for two more years to get the right to claim unfair dismissal again. This typically ranges from £200 to £500 and should be included as a separate line item on the Schedule of Loss.
To give you a sense of the sort of awards which are actually made by the Employment Tribunal for unfair dismissal in practice – in 2021-2022 the highest award for unfair dismissal was £165,000. However, the average award was £13,541 and the median was £7,650.
The Basic Award in unfair dismissal claims is calculated in the same way as statutory redundancy pay, so you can use the Government’s online calculator to work it out.
The amount you can receive for the basic award depends on three factors:
- how long you have worked for your employer at the date of the dismissal;
- how old you were when you were dismissed; and
- how much your weekly pay is, before income tax and National Insurance are deducted. (This is called your ‘gross weekly pay’).
However, there is a maximum amount for a week’s pay under the basic award. If you were dismissed after 6 April 2022, the maximum weekly amount for the purpose of the basic award calculation is £571, this rises to £643 for dismissals after 6 April 2023. So, even if your gross weekly pay is more than this, you can only claim up to £571 per week for dismissals before 6 April 2023 and £643 per week for dismissals after this date. The maximum that can be awarded is 30 weeks of pay, which is £19,290 for dismissals from 6 April 2023.
The compensatory award is more complex to calculate, and is based on looking in detail at the loss which the Claimant has suffered. There is a statutory maximum, which was £93,878 (for dismissals between 6 April 2022 and 5 April 2023) and rises to £105,707 for dismissals after 6 April 2023 or one year’s pay, whichever is lower.
The test which the Tribunal uses to assess the amount of the compensatory award is that it considers what would be “just and equitable in all the circumstances”, after looking at the losses which the Claimant has put forward. The Claimant should collect evidence of their losses, including wages from the date of termination until the date of the assessment by the Tribunal, and any loss of other employment benefits, e.g. pension, health insurance, any allowances e.g. company car allowance, etc.
No maximum award applies where a person is found to have been unfairly dismissed for one of a number of reasons related to health and safety or for making a protected disclosure (whistleblowing).
Finally, it is worth noting that the Tribunal cannot award anything in an unfair dismissal claim for any upset or stress caused to the Claimant because of the dismissal – damages for injury to feelings are only available in discrimination claims.
4. Compensation in discrimination claims
If you win your discrimination case, the Employment Tribunal can:
- Make a declaration that you have been discriminated against.
- Award damages (money).
- Make a recommendation as to action the employer should take to reduce the adverse effect of the discrimination.
Please see our advice page for general advice on discrimination claims here.
How compensation is calculated in discrimination claims
Compensation in discrimination claims is “uncapped”, which means that there is no statutory maximum, unlike in Unfair Dismissal claims. This means that compensation awards can be very high, but note that the figures you may see in the press might be newsworthy because they are unusually high. For example, we know that the highest award for Sex discrimination in 2021-2022 was just over £185,000, with the average being less than £25,000 and the median award was just under £18,000.
The compensation may consist of:
- Financial loss which has been incurred by the date of the hearing, e.g. loss of earnings; loss of non-cash benefits; loss of pension contributions.
- Future financial loss which may continue beyond the end of the hearing, e.g. where you have lost your job, loss of earnings based on how long the Tribunal thinks it will take you to find another job, loss of earnings where you have a new job but at a lower rate of pay, loss of pension value.
- In discrimination cases, compensation for injury to feelings. Evidence of this will be necessary. An award for injury to feelings can be made even if there is no financial loss – for example, where discriminatory comments were made to a Claimant who remained in post, but was deeply affected by the comments. (See below on the “Vento Guidelines”).
- In some cases, compensation for injury to health, e.g. where the discrimination has caused severe depression or a stress disorder. Medical evidence will be essential.
- In discrimination cases, interest – see further below.
- In some cases, uplifts – see further below.
- Limited/fixed amounts for breaches of certain laws, for example breaches of the flexible working procedure.
Financial loss which has been incurred by the date of the hearing
If you have lost money because of your employer’s actions you must claim it, explaining what you are claiming and why. This applies for discrimination, detriment and unfair dismissal claims. You might have lost earnings because you lost your job, or were not given suitable work. You need to compare what you should have received with what you actually received (but be aware that specific rules apply where you have claimed certain benefits- please see below). This can be claimed for both unfair dismissal and discrimination claims.
Evidence of this loss can include:
- Payslips from before and after the discrimination happened.
- Bank statements.
- Invoices for nursery fees.
Future loss which may continue beyond the end of the hearing
Employment Tribunals can, in some cases, award damages for future loss. Future loss is not limited to claims where you have lost your job, but it is most common in such claims. Predicting future losses will always involve some guesswork, but as a guide, you should think about how long it will take you to find another job in your particular circumstances and in the particular job market you are in. It’s important to be optimistic but realistic. It is unusual for a Tribunal to award future losses of more than one year’s earnings.
A more likely award is six to twelve months. You should, if possible, bring evidence about how long it is likely that you will be out of work for. This might be a letter from a recruitment agency, or you might be able to show this with printouts of job searches demonstrating the availability of suitable jobs.
If you change career and this is a sensible and realistic thing to do, then the Tribunal will take that into account and may even award money for fees incurred in retraining necessary.
Future losses can be claimed for both unfair dismissal and discrimination claims. However, there is a cap on the maximum which can be awarded for an unfair dismissal compensatory award. The maximum which can be awarded is £93,878 (from April 2022) and £105,707 (from April 2023) or one year’s gross pay, whichever is the lower figure. The maximum cap normally changes each year in April.
Compensation for injury to feelings
Injury to feelings can only be claimed in discrimination claims.
Some Employment Tribunal Judges will expect the Claimant to specify the level of injury to feelings they are asserting, and the period of loss claimed for. It is probably best to put in an estimate which is on the high side, but nevertheless reasonable and realistic, and be prepared to discuss the basis of your claim.
For injury to feelings, you should always refer to the ‘Vento bands’ (so called because they were established in a case called Vento v Chief Constable of West Yorkshire Police from 2003, which set out guidelines on compensation for injury to feelings, with three categories or bands, depending on how serious the Tribunal considers the injury to feelings to be).
- The lowest Vento band is from £1,100 to £11,200;
- The middle Vento band is from £11,200 to £33,700; and
- The highest Vento band is from £33,700 up to £56,200. (The most serious cases may exceed £56,200).
Note: these Vento bands will apply to claims brought from 6 April 2023, and the bands may be revised in future.
An award for injury to feelings is meant to reflect how upset the employer made the claimant feel, not to punish the employer for how badly they have behaved. For this reason, it’s important for you to give evidence to the Tribunal about what happened to you, and how the discrimination affected you and made you feel.
You may need witness statements from family, friends, medical professionals or support workers to provide evidence to support your claim. Remember your own witness statement is evidence, so make sure that you state if you were tearful after a meeting, or if you had difficulty sleeping because of the stress of your situation, for example in respect of a discriminatory comment, or how much pressure a working pattern put on you.
- As a general guide, the lower Vento band is for relatively minor, often one-off acts of discrimination. For example, in the case of Craddock v Fountoura Mr Craddock was subjected to harassment from a manager who continually suggested that Mr Craddock should start a sexual relationship with a colleague. He was awarded £4,500 for injury to feelings. The Judge said “We do not consider the upset caused to be such that the injury to feelings moves out of the bottom band of Vento – however the upset was real and tangible. He cried when he told us about his upset and was very emotional.”
- The upper band is for very severe discrimination, such as a prolonged campaign of bullying, as happened in the case of Michalak v Mid Yorkshire Hospitals NHS Trust. Dr Michalak was subjected to long term discrimination so severe that she suffered psychiatric injury and is unlikely ever to work again. Dr Michelak brought a great deal of medical evidence as to her injury, and as well as being awarded £30,000 for injury to feelings, she was also awarded a large sum for personal injury. It cannot be overstated how unusual this case was, Dr Michalak’s psychiatric damage was very severe and devastating. This level of compensation will be very rare in most cases.
In Miles v Gilbank, a case in the Employment Appeal Tribunal, the EAT upheld the award of £25,000 (at the time of the claim the top of the upper Vento band) for injury to feelings. Miss Gilbank was a pregnant employee whose manager had subjected her to a vicious campaign of bullying and discrimination that had demonstrated a “callous disregard or concern for the life of her unborn child”.
- The middle band is for acts that fall in the middle, including fairly minor incidents that lead to dismissal.
It is worth reading cases where high and low amounts have been awarded to get an idea about how Tribunals assess injury to feelings. Ultimately, this is very difficult to quantify, and evidence will be key.
In most cases, the evidence for your claim for injury to feelings and/or aggravated damages should be set out in your Witness Statement and backed up with documentary evidence, such as notes from a medical professional, or a sickness absence record. In some cases, Claimants will have a record of what was said or done to them and the effect this had, for example a diary record or a text message to a friend or relative. Evidence from the time of the event will often be treated as having more weight.
Many people find it difficult to talk about their feelings, but unless you tell the Employment Tribunal how upset you were, they are not going to know!
Questions to ask yourself when drafting your Witness Statement should include: “How did I feel when X happened?”, “Was I tearful?”, “Did I need to speak to my GP or a counsellor about X, and do I have any records of this?”, “On how many occasions did I cry? For how long?”, “Did it affect my sleep/health/eating/relationship with partner/children/friends?”.
It is sometimes difficult to strike a balance between telling the Tribunal what happened and sounding melodramatic, so evidence of what you suffered is very helpful.
If you were badly affected, then having someone close to you at the Tribunal speaking as a witness might be helpful.
Where you were severely affected, for example, suffering from diagnosed depression or anxiety, medical evidence will be essential – and seek specialist legal advice about if you would be better off claiming for personal injury in the civil courts.
Compensation for injury to health
Unfortunately Working Families does not have capacity to advise on compensation for injury to health, i.e. “personal injury claims”. This is because personal injury law is a separate specialism from employment law, with very different rules, procedures, time limits etc, and such claims are not normally brought in the Employment Tribunal.
If you have suffered ill health because of your employer’s actions, then seek specialist legal advice before starting your claim. It may be the case that you should claim damages for this as part of your Employment Tribunal claim. However, it may be better or more appropriate for you to make a separate claim for personal injury in the High or County Court.
If you claim personal injury in an Employment Tribunal you may not be able to claim for the same injury in the civil courts.
As the Employment Tribunal and civil court have different tests, it is important to get advice on which legal route gives you the best chance of a successful claim and of maximum compensation.
Calculating compensation in maternity discrimination cases
Unlike normal unfair dismissal cases, if you were dismissed because of your pregnancy or maternity, compensation is not capped, i.e. there is no legal maximum.
You will need to work out what you would have earned to calculate your compensation, including any loss of pension or other contractual benefits such as health insurance, commission, etc.
You should look at the period from your dismissal up to the date of the Tribunal hearing, as you are looking at what you would have earned if you had not been dismissed.
This can be complex, as it involves taking into account what you would have received during your maternity leave by way of Statutory Maternity Pay or Maternity Allowance, and any contractual maternity pay entitlement if your employer offers more than the statutory minimum pay during pregnancy. You must then set off, i.e. subtract, any earnings or benefits you did in fact receive in place of pay during the relevant period following your dismissal.
- The following benefits are taken into account; jobseeker’s allowance (both income-based and contributory – the DWP may refer to new style JSA), income-related employment and support allowance, Universal Credit (UC) and income support. Only the amount of these benefits you received from the date of termination of your employment and up to the conclusion of the Tribunal (when it announces or sends you its decision) are taken into account. For Universal Credit, the amount should reflect the difference between what you got & what you would have got if you’d not been dismissed & earnings had continued.
- As well as reducing your compensation, the amount of these benefits may be recovered from your employer, unless you reach a settlement with your employer before the Tribunal hearing. If you reach a settlement before the Tribunal, these benefits won’t be recouped from them, which means they will pay less overall. This may encourage them to settle the claim with you rather than go to Tribunal.
- In practice, it will usually be new style jobseeker’s allowance (a contributory benefit) and universal credit which are involved, unless the period between your dismissal and the Tribunal hearing was at a time when you could still get the other benefits (which are being replaced by universal credit).
- Tax credits, child benefit, housing benefit, council tax reduction and other benefits that are not dependent on your income, such as contributory Employment and Support Allowance (including ‘new style’) or Personal Independence Payment, are not taken into account and do not need to be subtracted from any compensation awarded.
If you can show that you lost out on an opportunity for promotion as a result of maternity discrimination, a Tribunal can calculate compensation by looking at the difference between your salary and what you would have earned in the more senior role if you had been promoted.
- If you are still out of work at the date of the Tribunal hearing, and you think it will take you, for example, another six months to find another job, you should claim for six months’ loss of future wages, after tax and national insurance have been deducted. You will need to estimate how long you think you will continue to be out of work. This will depend on the type of work that you do and the job situation in your area. You may need to take some advice from your local Jobcentre about the average time it takes a worker to find a similar job.
- If you have found another job, you should claim your loss of earnings up to the date you started the new job. For example, if you were out of work for three months before you found another job, you should make a claim for three months’ lost salary after tax and national insurance have been deducted. If the new job does not pay as much as the old job, you will need to estimate how long it would take you to find another job at the same pay you received before you were dismissed. The rules for calculating this are the same as if you hadn’t found a new job.
Here is a link to an Employment Tribunal judgment from a case which was heard in 2021, which includes figures for the damages awarded in a maternity discrimination case. You may find it useful to read this to show how an Employment Tribunal looks at these issues in practice.
5. Aggravated damages
Where an employer has behaved particularly badly (in other words aggressively, oppressively or maliciously) a Tribunal might award “aggravated damages”, but this is unusual. There must be a link between the act complained of and the injury suffered by you. This can happen for instance when the employer:
- has deliberately discriminated against you when they knew what they were doing was against the law; or
- has acted in a particularly unpleasant manner when they defended the employee’s claim (e.g. if the employer meant to hurt the employee or if they were rude or dismissive at the hearing).
But remember that, like damages for injury to feelings, aggravated damages are designed to compensate a claimant for injury, and not to punish an employer.
In one case, a Tribunal awarded £2,000 when the employer tried to prove the employee was lying and wouldn’t accept that he was disabled, despite overwhelming medical evidence.
6. Uplifts to compensation
Sometimes a claimant’s compensation can be significantly increased if a “statutory uplift” applies, so this is something which is always worth checking.
Employment Tribunals can increase a compensatory award by between 10 and 25% if the employer failed to follow the Acas Code of Practice on disciplinary and grievance procedures. Here is a link to the Code.
If the Tribunal is going to consider awarding an uplift of compensation, they will ask themselves first if the case is such that it would be “just and equitable” to award an uplift? They will then ask themselves what % uplift would be just and equitable, with a maximum of 25%. The Tribunal will then look at whether the uplift needs to be adjusted to avoid any double counting with other parts of the award, and will make a final determination looking at the overall case.
Employment Tribunals do not generally have the power to award interest on losses, despite the length of time that can have passed between the date when the Claimant suffered the loss, and the date of the final award being made.
However, in discrimination and equal pay claims only, you can claim interest on past losses and on some of the award for injury to feelings. There is a guide at: Citizen’s Advice website
Or you could say “such interest as the Employment Tribunal sees fit”. Often a rate of interest of 8% is applied, calculated on a daily basis. Remember, judges are generally more likely to award an amount if you have suggested and reasonably explained a figure, rather than the judge having to work it out themselves.
8. Deductions from Employment Tribunal Awards
It is important to note that Employment Tribunals can reduce an award of compensation in certain circumstances.
For example, the compensatory award in an Unfair Dismissal claim can be significantly reduced if the Claimant is ultimately considered to be to blame for their dismissal. (For example, this may happen where the correct procedure for dismissal was not followed properly, but the Claimant had committed such serious misconduct that they would have been dismissed anyway, or they contributed significantly to the dismissal). This is sometimes referred to as a “Polkey deduction”, named after a case where the Claimant’s name was Polkey.
See further in the next section on reductions to compensation for failure to comply with the duty to mitigate loss.
9. Mitigation of loss
An important principle for the Employment Tribunal in assessing compensation for Unfair Dismissal and Discrimination claims is that a Claimant must mitigate their losses. This is often described as a duty upon the Claimant, and means that you must try to reduce your losses.
So, even if you have succeeded in your claim, an Employment Tribunal will not award a sum for loss of earnings if they think you have been sitting back, allowing the losses to pile up. The Employment Tribunal will look carefully at the extent to which you could have minimised your loss by using “reasonable efforts” to seek other employment.
The burden of proof to show that a Claimant has failed in their duty to mitigate their losses is upon the Respondent (employer). However, it is important for the Claimant to collect evidence of their efforts to mitigate loss.
You must keep records of your job search, such as job adverts you have applied for, a diary of which jobs you have applied for and interviews attended, and any written evidence, e.g. written applications or rejection letters. You should also include details of any training undertaken or voluntary work done to try to improve your work prospects. Copies of all of these documents should be kept together in a file, and will need to be brought to the Employment Tribunal hearing.
Please note that because the burden of proof is on the Respondent (employer), and they will want to reduce the amount that is awarded as far as possible, they may gather evidence of vacancies which the Claimant could have applied for. In high value cases the Respondent may even call an expert to give evidence about job opportunities in the sector the Claimant works in, to try to demonstrate that the Claimant did not try hard enough to mitigate their loss.
If there is a reason why you have been unable to look for work, for example if you have been ill or looking after small children, then collect evidence of this fact and be prepared to submit it to the Tribunal. But remember that the Employment Tribunal is not going to award you loss of earnings for a period where you would have been unable to work in any case.
If you have worked on a consultancy or self-employed basis in the past, the Tribunal may conclude that it would have been reasonable for you to do this following a dismissal, to reduce your losses, depending on the circumstances.
Evidence of mitigation can include:
- Record of jobs applied for.
- Record of recruitment agencies registered with.
- Record of training done.
- Medical evidence.
- Evidence of unavailability of childcare.
10. Compensation for unlawful deduction of wages
If your employer makes unlawful deduction from your wages, you can seek a declaration from the Employment Tribunal of the unlawfully deducted sum, and repayment of the sum. You can claim up to 2 years of deductions, as long as there was not a gap of 3 months or more between the deductions. As with all Employment Tribunal claims, you need to claim within 3 months of the (last) deduction.
In some circumstances the Employment Tribunal will award a sum which it considers “appropriate” to compensate a claimant for any financial losses which they have suffered because of the deduction – so if you have had to pay an overdraft charge to your bank because of the deduction from your wages, you may be able to ask for compensation to cover this.
11. Compensation for breach of flexible working rules
If your employer fails to follow the statutory flexible working procedure, an Employment Tribunal can order the Tribunal to reconsider the request, and/or award up to eight weeks’ pay as compensation. One week’s pay is capped in the same way as for statutory redundancy and unfair dismissal, i.e. at £571 per week (from 6 April 2022) rising to £643 per week from 6 April 2023.
Do bear in mind that the compensation for a breach of the statutory flexible working laws is not really “fixed”, as the Employment Tribunal can choose to award anything up to eight week’s pay, or it can award nothing at all, if the breach is found to be minimal.
For advice on the correct procedure for employers to follow on flexible working, please see our detailed advice pages on flexible working.
Do also look at our detailed advice page on whether refusal of flexible working could amount to indirect sex discrimination.
12. Compensation for redundancy
Some employers have their own redundancy policy which offers more than the statutory minimum – check your employer’s staff handbook for this.
If your employer has no “additional” policies around payment in the event of redundancy, you will be entitlted to receive statutory redundancy pay if you have worked for your employer for a continuous period of 2 years or more and you’re an employee, rather than a worker or some other status.
Statutory redundancy pay is calculated according to a formula as follows:
- half a week’s pay for each full year you were aged under 22
- one week’s pay for each full year you were 22 or older, but under 41; and
- one and half week’s pay for each full year you were 41 or older
Length of service is capped at 20 years. Your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice. If you were paid less than usual because you were ‘on furlough’ because of coronavirus, your statutory redundancy pay is based on what you would have earned normally.
If you were made redundant on or after 6 April 2023, your weekly pay is capped at £643 and the maximum statutory redundancy pay you can get is £19,290. If you were made redundant before 6 April 2023, these amounts will be lower.
Here is a helpful calculator to work out your statutory redundancy pay.
13. Other outcomes from the Employment Tribunal: Recommendations, Reinstatement/Re-engagement
Recommendations and orders for reinstatement/re-engagement are rare, and occur in fewer than 1% of cases.
Reinstatement/re-engagement will only be ordered if the Claimant is successful, they have sought that outcome, and it is “reasonably practicable”.
There is sometimes a tactical advantage for a Claimant in asking for reinstatement, re-engagement or a recommendation, because if the employer fails to comply with such an order, this could mean that the Claimant is entitled to enhanced damages.
However, you need to bear in mind that the employer might comply with an order or recommendation, so don’t ask for reinstatement if you can’t bear to be in the same room as your former boss!
14. Costs and taxation of compensation in the Employment Tribunal
You cannot normally claim legal costs as part of your compensation, or on the outcome of your case.
Costs are only awarded at the Employment Tribunal very rarely, and following particular types of serious conduct. There is more information on costs in the Employment Tribunal here.
Please note that Working Families is unable to give tax advice, so if in doubt, seek specialist advice.
Usually, the following payments are taxable:
- Awards for salary/earnings,
- Awards for holiday pay,
- Awards for compensation for loss of employment of over £30,000; and
- Most payments in lieu of notice.
The following payments are not usually taxable:
- compensation for loss of employment of up to £30,000
- injury to feelings awards; and
- legal costs.
15. How receipt of welfare benefits might affect any Tribunal award
If you are receiving certain welfare benefits, this can impact on the amount of compensation you get. Any Universal Credit, income support, JSA and income based ESA you get during the period of time that a loss of earnings award is intended to cover (until the Tribunal hearing) will be set off from the compensation you get for that period of time.
These rules do not apply if a case is settled before the final hearing.
It is also important to note that if you win compensation from your employer, the award might affect any benefits that depend on your income or your savings, for example Universal Credit or Tax Credits.
- If you are on Universal Credit, any lump sum compensation you receive will be treated as “capital”. If your total capital is less than £6,000 your Universal Credit will not be affected. If your capital is between £6,000 and £16,000 you are treated as having some income from it. For every £250, or part of £250, you have between £6,000 and £16,000 you are treated as having a monthly income of £4.35. If your capital is over £16,000 you will not be entitled to Universal Credit.
- If you are on Tax Credits, any compensation awarded by an Employment Tribunal is treated as earnings rather than capital, however the first £30,000 of any compensation is ignored and will not affect the amount of Tax Credits you receive. Any compensation you receive above £30,000 is treated as earnings in the usual way and may affect your entitlement to Tax Credits.
- It is important that you inform whoever pays your benefits about your Tribunal award to make sure you are paid the correct amount of benefit and do not end up being paid too much.
- You can ask them how it will affect your benefits so that you are clear about what your income will be, and how this might affect other aspects of your family’s budget.
- Failure to inform the relevant benefit department that you have received a compensation award could result in you having to pay a financial penalty, and in some situations, you can be taken to court, so make sure you let them know.
The information on the law contained on this site is provided free of charge and does not, and is not intended to, amount to legal advice to any person on a specific case or matter. If you are not a solicitor, you are advised to obtain specific legal advice about your case or matter and not to rely solely on this information. Law and guidance is changing regularly in this area.
We cannot provide advice on employment rights in Northern Ireland as the law is different. You can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.