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Various issues can arise when terminating employment and a number of claims can be brought by an employee who has been dismissed.

Key points

  • In addition to termination by the employer, there will be a dismissal where the employee resigns in response to a fundamental breach by the employer (constructive dismissal).
  • Dismissing in breach of contract will give rise to a claim for wrongful dismissal. Typically, wrongful dismissal claims concern a dismissal with inadequate notice.
  • Employees with more than one month of service are entitled to statutory minimum notice.
  • A payment in lieu of notice (PILON) clause allows an employer to dismiss without notice and make a payment in lieu without being in breach of contract.
  • Unfair dismissal claims can be brought by employees who have sufficient qualifying service.
  • A dismissal will be unfair if is not for a fair reason and/or the employer has acted unreasonably in treating the reason as sufficient.
  • The five fair reasons for dismissal are capability, conduct, redundancy, statutory illegality and some other substantial reason.
  • No qualifying service is required to bring an unfair dismissal claim where the dismissal is for one of the automatically unfair reasons.
  • If an employee is dismissed without following the Acas Code of Conduct: Disciplinary and Grievance Procedures, there is an increased risk of the dismissal being found to be unfair and any compensation awarded can be increased by up to 25 per cent.
  • Compensation for unfair dismissal can take the form of a basic award (based on age, pay and years of service) and a compensatory award for losses.
  • Tribunals have the power to order reinstatement or re-engagement following a successful claim for unfair dismissal.

Recent developments

New compensation limits in place

New limits, applicable from 6 April 2022, are now in place:

Payments                                                 From 6 April 2020 From 6 April 2021 From 6 April 2022
Limit on guarantee payments £30 £30 £31
Limit on a week's pay for calculating redundancy and unfair dismissal basic award £538 £544 £571
Maximum basic award for unfair dismissal and statutory redundancy payment (30 weeks' pay subject to the limit on week's pay) £16,140 £16,320 £17,130
Minimum basic award for dismissal on trade union, health and safety, occupational pension scheme trustee, employee representative and on working time grounds only £6,562 £6,634 £6,959
Maximum award for unlawful inducement relating to trade union membership or activities, or collective bargaining £4,294 £4,341 £4,554
Maximum compensatory award for unfair dismissal A year's pay subject to max cap of £88,519 A year's pay subject to max cap of £89,493 A year's pay subject to max cap of £93,878
Minimum compensation for employees excluded/expelled from trade union £10,022 £10,132 £10,628
Contract claims (if a claim for breach of contract (eg wrongful dismissal) is brought in an employment tribunal, compensation is capped at £25,000. If the claim is for more than £25,000, it can be made in the county court or high court £25,000 £25,000 £25,000
Government announces plans for new Statutory Code of Practice on fire and rehire

The use of fire-rehire practices has been widely criticised as a means of renegotiating contractual terms and conditions through force.

A new statutory code will be developed by the Department of Business, Energy and Industrial Strategy (BEIS) on dismissal and re-engagement. The Code will include practical steps that employers should follow in these situations.

Consultation will take place later in 2022 on the draft Code later, with a view to implementing this as soon as parliamentary time allows.

New Vento guidelines published
Vento bands Claims presented on or after 6 April 2020 Claims presented on or after 6 April 2021 Claims presented on or after 6 April 2022
Lower band £900 to £9,000 £900 to £9,100 £990 to £9,900
Middle band £9,000 to £27,000 £9,100 to £27,400 £9,900 to £29,600
Upper band £27,000 to £45,000 £27,400 to £45,600 £29,600 to £49,300

Only in exceptional cases will compensation awards for injury to feelings exceed the upper band.