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Advice

Employment claims — Increase in compensation limits from 6 April 2021

It has been confirmed that statutory redundancy pay will rise from 6 April 2021.

The compensation limits applying to certain employment claims will increase with effect from 6 April 2021. The rates of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will also rise from April 2021.

Compensation limits

The changes come into effect from 6 April 2021 and the new limits apply when the appropriate act — for example, termination of employment — occurs on or after 6 April 2021.

The new limits are:

  • A “week’s pay” for the purposes of calculating both the basic award in unfair dismissal cases and statutory redundancy payments will be capped at £544 — the current limit is £538.
  • Consequently, statutory redundancy pay will increase, with the maximum payment increasing to £16,320.

Compensation for unfair dismissal

Compensation for unfair dismissal claims is split into a “basic” award and a “compensatory” award. The basic award is calculated in the same way as statutory redundancy pay and will, therefore, increase as described above.

The maximum compensatory award for unfair dismissal will now be £89,493 — the current limit is £88,519. The separate cap of one year’s gross pay on “ordinary” unfair dismissal compensatory awards still applies so the maximum award will therefore now be the lower of one year’s pay and £89,493.

Statutory pay rates

From 6 April 2021, the statutory sick pay rate will increase from £95.85 per week to £96.35.

From 4 April 2021, the rate of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will increase from £151.20 per week to £151.97.

For further guidance on what the new statutory limits mean for your business, contact our employment lawyers.