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05 Mar 2020

Annual increase to employment compensation limits

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The Employment Rights (Increase of Limits) Order 2020 has been laid before Parliament, setting out increases to the compensation limits and minimum awards payable under employment legislation with effect from 6 April 2020.

The main changes are:

  • the maximum compensatory award for unfair dismissal will be the lower of 12 months' salary or £88,519 (up from £86,444); and
  • the limit on a week’s pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal increases from £525 to £538.

The new rates will apply where an individual's effective date of termination of employment falls on or after 6 April 2020. The current limits will continue to apply in respect of any dismissals which take place before 6 April 2020, irrespective of the date on which compensation is awarded.

Although not contained within the 2020 Order, the government has also amended the rates of maternity pay, paternity pay, shared parental pay and adoption pay applicable from Sunday 5 April 2020 and the rate of sick pay applicable from 6 April 2020, in line with the Consumer Price Index rate of inflation, as follows:
 

  • Maternity/Paternity/Shared Parental/Adoption pay increase from £148.68 to £151.20; and
  • Sick pay increase from £94.25 to £95.85
Please also remember that, from 6 April 2020, termination payments in excess of £30,000 will be subject to employers’ National Insurance Contributions (unless there is any change in next week’s Budget). This means that from 6 April 2020, the employer will be responsible for this, at a current rate of 13.8% on the amount exceeding £30,000, making termination packages over this amount much more expensive. To avoid this additional sum, the payment must be paid before 6 April 2020.
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