Compensatory Award for Unfair Dismissal: What You Could Get
Compensatory Award for Unfair Dismissal: What You Could Get
Important: This guide provides general information about UK employment law. It is not legal advice and cannot account for your specific circumstances. Time limits for employment tribunal claims are strict. If you're considering a claim, check deadlines carefully and consider seeking professional advice.
Jurisdiction
This guide applies to England, Wales and Scotland. Northern Ireland has different rules and limits.
In brief: A compensatory award for unfair dismissal aims to cover your financial loss — such as lost earnings and benefits. For many claims it is capped at the lower of £118,223 or 52 weeks' gross pay (for terminations on or after 6 April 2025). Tribunals may reduce it for factors like mitigation or contribution. It sits alongside the basic award. From 2027, the cap is being abolished under the Employment Rights Act 2025.
Last updated: 6 February 2026 By Yerty, using published tribunal decisions, tribunal data analysis, and UK statutory guidance.
If you've been unfairly dismissed, it's normal to wonder what compensation might look like. The numbers can feel abstract when you're still processing what happened. This guide explains what the compensatory award is, what it can cover, the main cap, and the common reasons it may be reduced. It's written to help you understand the moving parts — not to predict any outcome.
What a Compensatory Award Is (in Plain English)
The compensatory award is designed to compensate for financial loss caused by an unfair dismissal — so far as money can do that. It is not a punishment for the employer, and it is not automatic.
It normally sits alongside a basic award. The basic award is calculated using statutory rules (including a weekly pay limit). From 6 April 2025, the maximum 'week's pay' used in those calculations is £719, which affects the basic award maximum (not the compensatory cap).
The compensatory award focuses on loss and is usually subject to a separate cap.
For the full overview of unfair dismissal rights, time limits and next steps, start with Unfair Dismissal: Your Rights, Time Limits & What To Do (UK Employee Guide).
Who This Applies To (and When It's Relevant)
A compensatory award is only available if a tribunal finds a dismissal was unfair (or if the case settles on terms that include compensation). Most people looking this up are trying to sense-check what kinds of financial losses tribunals may consider, and what usually reduces the final figure.
If you're unsure whether unfair dismissal applies to you (for example, because of length of service), see Unfair Dismissal Under 2 Years: Can You Still Claim?.
If you're unsure about your employment status (employee vs worker), see What Are My Employment Rights?.
The Statutory Cap: £118,223 or 52 Weeks' Pay (Whichever Is Lower)
For many ordinary unfair dismissal claims, the compensatory award is capped at the lower of:
- £118,223, or
- 52 weeks' gross pay (often described as a 12-month pay cap).
These limits are updated each April. Which cap applies usually depends on the effective date your employment ended (not always the date on the dismissal letter). For terminations before 6 April 2025, earlier limits may apply.
Claims where the cap does not currently apply: Some types of dismissal already have no cap on the compensatory award. These include dismissals for making a protected disclosure (whistleblowing) and for carrying out health and safety activities. In those cases, compensation is based on actual financial loss with no statutory upper limit.
From 2027, the cap is being removed for all unfair dismissal claims. The Employment Rights Act 2025 abolishes the statutory cap on compensatory awards from January 2027. From that point, all unfair dismissal compensation will be based on actual financial loss — the same approach that already applies to whistleblowing and health and safety dismissals. See the Upcoming Changes section below for more detail.
Related: Automatic Unfair Dismissal: A Guide for UK Employees (day-one protections in certain situations).
What Losses Can Be Included in a Compensatory Award
A compensatory award may include different 'heads of loss'. Tribunals generally look for losses that flow from the dismissal, are supported by evidence, and are reasonable in the circumstances.
| Loss type | What it can cover (high-level) | Typical evidence (examples) |
|---|---|---|
| Past loss of earnings | Pay you missed between dismissal and finding replacement earnings (if any). | Payslips, contract, P45/P60, bank statements |
| Future loss | A period of ongoing loss if you remain unemployed or earning less. | Job applications, rejection emails, job-search notes |
| Benefits | Employer pension contributions or contractual benefits you lost. | Benefit/pension statements, scheme letters, policy documents |
| Loss of statutory rights | A conventional sum (often around £500) recognising you will need to build up protection again. | Not evidence-based — tribunals apply a standard figure |
| Expenses | Reasonable costs caused by dismissal (often limited). | Receipts, invoices, travel/job-search records |
Tribunals may also consider other financial impacts if they are properly evidenced and linked to the dismissal. Equally, they may refuse losses that are speculative, not evidenced, or not caused by the dismissal.
How Past Loss of Earnings Is Calculated
Past loss of earnings covers the period from dismissal until the tribunal hearing (or until you found new work, if earlier).
The calculation is usually:
- your net weekly pay (after tax and National Insurance)
- multiplied by the number of weeks you were out of work or earning less
If you found a new job quickly but it pays less, the tribunal may award the difference between your old and new earnings for the period up to the hearing.
How Future Loss of Earnings Is Assessed
If you are still unemployed or earning less at the time of the hearing, a tribunal may award compensation for future loss. This depends on:
- how long the tribunal thinks it will take you to find equivalent work
- your age, skills, experience, and the local job market
- evidence of your job-search efforts
Future loss is not unlimited. Tribunals often award between a few months and 2 years, depending on the circumstances. The more evidence you provide about your efforts to find work, the more persuasive your case may be.
What the Compensatory Award Usually Does Not Cover
The compensatory award is focused on financial loss. It does not usually cover non-financial upset or hurt feelings in ordinary unfair dismissal. Injury to feelings is more commonly part of discrimination-type claims, which have different rules.
It also usually does not include punitive damages. The aim is compensation, not punishment.
What Can Reduce the Compensatory Award
Even where dismissal is found unfair, tribunals may reduce compensation. Common factors include:
1) Failure to mitigate
You are expected to take reasonable steps to reduce your loss — for example, by looking for new work. If a tribunal finds you did not try hard enough to find a job, it may reduce the compensatory award.
What counts as reasonable depends on the circumstances. Tribunals may expect:
- evidence of job applications
- registration with recruitment agencies
- willingness to consider roles at a similar level (not necessarily identical)
You do not have to take the first job offered, especially if it is much worse than your old role. But you cannot simply wait for the perfect job while claiming full loss.
2) Interim earnings
Income from a new job can reduce ongoing loss. If you found work during the loss period, tribunals will usually deduct what you earned from the compensation for that period.
3) Contributory conduct
If a tribunal finds you contributed to your own dismissal (for example, through your conduct), it may reduce the compensatory award by a percentage. This is called a contributory reduction.
Contribution must be:
- blameworthy or culpable conduct
- causally linked to the dismissal
For example, if you were dismissed for misconduct and the tribunal finds the process was unfair but your conduct was serious, it might reduce the award by 25%, 50%, or more. Contribution can reduce the award to zero in extreme cases, though this is rare.
4) Polkey reduction
A Polkey reduction applies when a tribunal finds the dismissal was procedurally unfair, but even with a fair process, you would likely have been dismissed anyway.
For example, if you were dismissed without a proper hearing but the evidence of misconduct was strong, a tribunal might find there was an 80% chance you would have been dismissed fairly. It could reduce the compensatory award by 80%, leaving you with 20%.
Polkey reductions are fact-specific and can range from small percentages to 100% (which would leave you with no compensatory award, though you might still receive a basic award).
5) Offsetting payments
Any payment you received from your employer that is designed to compensate for the same loss will usually be deducted. This can include:
- notice pay (if you were paid in lieu)
- settlement payments (if you reached an agreement before the tribunal)
- enhanced redundancy payments (the amount above the statutory minimum may be offset)
The tribunal will not 'double count' the same loss.
What Can Increase the Award (in Limited Situations)
In some cases, tribunals may adjust compensation where an employer unreasonably failed to follow the statutory code on disciplinary and grievance procedures. Any uplift is usually capped at up to 25%, and it depends on the circumstances.
If you unreasonably failed to follow the code (for example, by not using the grievance process), the award may be reduced by up to 25%.
For further information look at ACAS' Code of Practice on disciplinary and grievance procedures.
Evidence That Often Matters When Proving Loss
Because compensatory awards are evidence-led, the documents below often make a difference to how clearly loss can be assessed:
- Your contract and recent payslips (to show pay and contractual benefits).
- Dismissal outcome letters and key meeting notes (to anchor dates).
- Job-search records (applications, responses, interview notes) to show what happened after dismissal.
- Benefit or pension statements where you are claiming loss of benefits.
- Bank statements where they help show actual earnings received during the loss period.
- A schedule of loss (a clear breakdown of what you are claiming with supporting documents).
The more organised and clear your evidence, the easier it is for a tribunal to assess loss.
How Tribunals Assess Loss in Practice
Tribunals typically look at the period of loss, the evidence supporting it, and whether the claimed losses were caused by the dismissal. Claims are often presented as a 'schedule of loss' listing each head of loss (earnings, benefits, expenses, future loss) with supporting documents.
Because the compensatory award is designed to reflect actual loss, the same unfair dismissal can produce very different outcomes depending on pay, how quickly someone finds work, and what the tribunal finds reasonable.
A simple way to sense-check the logic is: what you lost, how long you lost it for, what changed when you found new work (if you did), and what evidence exists from the time.
The Basic Award: How It Works Alongside the Compensatory Award
The basic award is calculated separately using this formula:
- 0.5 weeks' pay for each full year of service under age 22
- 1 week's pay for each full year of service between ages 22 and 40
- 1.5 weeks' pay for each full year of service aged 41 or over
Weekly pay is capped at £719 (as of 6 April 2025), and the maximum service counted is 20 years.
The basic award is also subject to reduction for contribution, but not for failure to mitigate or Polkey. It cannot be reduced below zero.
Example: Age 45, 8 years' service, weekly pay £800 (capped at £719) Basic award: 8 × 1.5 × £719 = £8,628 If the tribunal found 20% contribution, this would reduce to £6,902.
You can learn more about how basic awards work here: Basic Award for Unfair Dismissal: How It's Calculated in 2025.
Settlements and Negotiations (High-Level)
Many unfair dismissal disputes settle before a final hearing. Settlements may reflect risk, evidence strength, time limits, and practical factors such as how quickly someone can find work. A settlement figure may be different from what a tribunal might award.
Settlement figures are often lower than the potential tribunal award because they are certain, immediate, and avoid the stress and uncertainty of a hearing.
Time Limits (Strict Deadlines Apply)
Time limits can end otherwise strong cases — and if interim relief might apply, that's the deadline to prioritise first. In those cases, you usually need to apply within 7 days of the effective date of termination (EDT) (the date your employment actually ended).
After that, for most unfair dismissal claims, the main deadline is 3 months minus 1 day from the EDT. The EDT isn't always the same as the date on your dismissal letter.
Before submitting a tribunal claim, you must notify ACAS for early conciliation. The time spent in early conciliation may extend your deadline, but you should not rely on this — always start the process well before the 3-month deadline.
If you miss the deadline, the tribunal may not have jurisdiction to hear your claim — regardless of how much you lost.
For more detail, see Workplace Deadlines and Time Limits.
Upcoming Changes: Employment Rights Act 2025
The Employment Rights Act 2025 received Royal Assent on 18 December 2025. Several changes directly affect the compensatory award and unfair dismissal claims more broadly:
- Compensatory award cap abolished from January 2027. The current cap (lower of £118,223 or 52 weeks' gross pay) will be removed entirely. From that point, all unfair dismissal compensation will be based on actual financial loss with no statutory upper limit — the same approach that already applies to whistleblowing and health and safety dismissals.
- Qualifying period reduced to 6 months from 1 January 2027 (down from the current 2 years). This means more employees will have access to unfair dismissal claims, including the compensatory award.
- Tribunal time limits extended to 6 months (from the current 3 months minus 1 day), expected no earlier than October 2026.
Until these changes come into force, current rules apply. Dates may still change — check the latest position before relying on them.
For the latest implementation dates: GOV.UK: Employment Rights Act implementation timeline
What to Do Next
If you are trying to understand what compensation might include, it may help to:
- Gather key documents (outcome letter, contract, payslips, benefit records).
- Note the key dates (dismissal date, pay periods, job-search timeline).
- Build a simple schedule of loss showing what you lost and for how long.
- Consider whether you have evidence of job-search efforts if mitigation might be questioned.
Yerty is designed to help you organise evidence, understand your rights, and take structured first steps. For complex cases — such as where contribution is disputed or loss is substantial — legal advice may be important. Yerty helps whether you have a solicitor or not. It can work alongside your lawyer, or support you if you're bringing the claim yourself.
For the wider unfair dismissal process and options, return to the pillar guide: Unfair Dismissal: Your Rights, Time Limits & What To Do (UK Employee Guide).
Frequently Asked Questions
What is a compensatory award for unfair dismissal?
A compensatory award for unfair dismissal is designed to compensate you for financial loss caused by the dismissal. It may include loss of earnings (past and future), loss of benefits, loss of statutory rights, and reasonable expenses. The amount depends on evidence of loss and efforts to find new work.
What is the cap on compensatory awards for unfair dismissal?
For many ordinary unfair dismissal claims, the cap is the lower of £118,223 or 52 weeks' gross pay for terminations on or after 6 April 2025. The cap is updated each April. Some claims (whistleblowing, health and safety dismissals) are already uncapped. From January 2027, the cap is being abolished for all unfair dismissal claims under the Employment Rights Act 2025.
What counts as 'loss' in a compensatory award?
Loss can include past earnings you missed, certain lost benefits (pension contributions, health insurance), loss of statutory rights (commonly £500), and sometimes a period of future loss if you remain unemployed or earning less. Tribunals may question losses that are speculative, not evidenced, or not caused by the dismissal.
Can the tribunal reduce the compensatory award?
Yes. A tribunal may reduce compensation where you did not mitigate your loss by looking for work, where your conduct contributed to the dismissal, or where it finds dismissal might have happened anyway even with a fair process (a Polkey reduction). Reductions can be substantial and depend on the facts.
What is the difference between a basic award and a compensatory award?
The basic award is calculated using a statutory formula based on age, service, and weekly pay (subject to a cap of £719 per week as of 6 April 2025) which changes yearly. The compensatory award is based on actual financial loss. Both may be awarded in unfair dismissal cases, and both sit alongside each other.
Does the compensatory award include injury to feelings?
Not usually for ordinary unfair dismissal. Injury to feelings is more commonly awarded in discrimination-type claims. If your situation involves discrimination alongside dismissal, different rules may apply.
What evidence do I need to prove loss?
Evidence may include payslips, P45/P60, pension statements, benefit documents, a schedule of loss, job application records, rejection emails, and evidence of new earnings if you found lower-paid work. Clear, organised evidence helps tribunals assess loss accurately.
Sources
- Employment Rights Act 1996
- Employment Rights Act 2025
- The Employment Rights (Increase of Limits) Order 2025 (SI 2025/348)
- GOV.UK: Unfair and constructive dismissal
- GOV.UK: Plan to Make Work Pay — Timeline Update (3 February 2026)
- Yerty's internal tribunal data analysis and guide methodology