Unfair Dismissal Compensation Reductions Explained

19 September 2017

If you go to an Employment Tribunal and succeed in a claim for unfair dismissal you will be awarded a sum of compensation. The compensation usually consists of two elements – a basic award and a compensatory award.

The basic award is based on pay, age and years of service and is a strict calculation. The compensatory award covers the financial loss relating to the dismissal.

Both the basic and compensatory awards are subject to limits and potential deductions.

Two of the most common deductions to compensation are for Contributory Fault and a Polkey Deduction (or reduction).

Contributory Fault

The basic and compensatory awards in unfair dismissal can be reduced by an Employment Tribunal where it finds that the employee’s conduct contributed to their dismissal.

According to case law, a reduction can be made where the employee is found to have caused or contributed to the dismissal. It is only conduct that the employer knew about that can be taken into account and it must actually have contributed to the employer’s decision to dismiss the employee.

As the case of Nelson v BBC (No. 2) [1997] IRLR 346 set out, there are three factors that must be satisfied if an Employment Tribunal is to find contributory fault:

  1. The relevant action must be culpable or blameworthy (including conduct which was perverse or foolish, bloody-minded or merely unreasonable in all the circumstances). This is a question of fact for the Employment Tribunal. An employee will not be penalised for conduct which they had no control over (e.g. ill-heath)
  2. It must have caused or contributed to the dismissal
  3. It must be just and equitable to reduce the award by the proportion specified

Employment Tribunals do sometimes make deductions of 100% for contributory fault.

Polkey Deduction

A Polkey Deduction can occur when an employer has been found to have acted unfairly in dismissing an employee by failing to follow the correct procedure. For example, an employer may have dismissed an employee without giving them the opportunity to appeal the decision.

In cases such as this the Employment Tribunal is likely to conclude the dismissal is unfair. It is not a defence for an employer to argue it would have made no difference to the outcome had they followed the correct procedure.

But if the Employment Tribunal decides that the employee may have been dismissed anyway, even if the correct procedure had been followed, they can reduce the compensatory award according to that likelihood as a percentage deduction. So, if they think a dismissal was absolutely inevitable, the compensatory award would be reduced by a full 100%.

If you are considering pursing a claim for unfair dismissal and would like advice as to your prospects of succeeding and likely compensation, please book a telephone appointment to speak with one of our Employment Law Solicitors.

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