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Employment Lawyer Rachel Harfield on why unfair dismissal compensation changes hit part-time workers hardest

By Principal Lawyer & Team Leader, Employment

What is changing?

All employees who have worked for their employers for sufficient length of time (2 years if your employment started on or after 6 April 2012, 1 year, if your employment started before that) have the right not to be unfairly dismissed.

There has always been a cap on the amount of compensation that an employment tribunal can award an employee who is unfairly dismissed. Currently an employment tribunal will assess how long the employee is likely to be out of work as a result of being unfairly dismissed and the amount awarded will generally reflect this up to a maximum sum of £72,300 (which rises in £74,200 in February 2013).

On 17th January 2013 the Government published its response to the consultation "ending the employment relationship." Amongst other things it intends to lower the cap on the maximum amount of compensation that an employee can receive for an Unfair Dismissal Claim to a year's pay up to a maximum of the existing cap. The Government intends to implement this change in the summer of 2013.

What does it mean?
Currently if you were earning, say, £20,000 a year, before you were unfairly dismissed, and the tribunal accepts that you are likely to be out of work for 3 years, you would achieve a compensatory award of £60,000. You recover your losses in full. Once the change comes in you would only receive £20,000. This is one year's pay despite the fact you are out of work for 3 years.

The changes affects all employees - not just Part Time Workers - but the change will have a particularly harsh impact on part time workers because of lower pay levels. As proportionately more women are part-time workers there is also likely to be a bigger impact on women overall. The effects will be felt even worse in regions where average incomes are lower. For example, the average pay in Wales is £19,216 a year, so the above example is therefore particularly striking.

I fear it will also be a licence to employers not to follow good Employment practice. In particular for those on lower pay, particularly part time workers, it puts a ready-reckoned price on their heads. Will an employer bother to work with an employee to try to, for example, improve their performance, or will they just proceed to dismissing them knowing that the employee will have a good Unfair Dismissal Claim but the most it will cost the employer is a year's part time pay. To bring an Unfair Dismissal Claim the employee would also need to meet their legal costs including, again in the summer of 2013, the introduction of upfront employment tribunal fees.

What can I do about it?
If you are entering new employment then, if you can, consider negotiating a longer period of notice that your employer has to give you to terminate your contract. This should provide you with a better buffer period where you are still entitled to be paid.

The cap does not apply if you are the victim of unlawful Discrimination, for example, if you were dismissed because you are female, or specifically selected because you are a part-time worker. You can then recover your losses in full.

It is also worth considering what arrangements you have in place to meet legal fees should the worse happen and you need to seek Employment Law Advice. For example, are you a member of a trade union or do you have legal expense insurance cover (often provided, for example, under household insurance policies) for employment disputes?