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Wrongful Dismissal

Key Points

  • Compensation for wrongful dismissal is a payment of, or in lieu of, damages for breach of contract It is different from an award for "unfair dismissal" which is a statutory entitlement (normally  calculated by formula plus  subject to a statutory limit)
  • A dismissal can be both "wrongful" (ie a breach of contract) and "unfair" (ie unfair pursuant to ERA 1996 s.94) at the same time. In that case, any compensation paid by the employer for "wrongful dismissal" (eg pay in lieu of notice) will normally be set off against the compensatory award part of an unfair dismissal award .
  • The most usual situation in which wrongful dismissal is claimed is where the employee is dismissed without notice . In that situation damages are normally limited to the net amount that the employee would have earned during the minimum period of notice which the employer could have lawfully given under the terms of the contract.
  • The first £30,000 paid as compensation for wrongful or unfair dismissal is normally exempt from tax and NI contributions .
  • Companies are specifically prohibited from making payments to directors as "compensation for loss of office" without a resolution by the members of the Company Companies Act 2006, s.217. This does not prevent payments genuinely paid on account of damages for breach of contract 
  • Employment Tribunals have (limited) jurisdiction in wrongful dismissal cases - damages can be awarded up to £25,000 

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