This article considers the legal framework to use when determining appropriate damages in the Northern Ireland Tribunals for claims involving unfair dismissal (including constructive unfair dismissal).

For cases involving discrimination or detriment under Part VI of the Employment Rights (Northern Ireland) Order 1996 (the “1996 Order”), this article should be read together with our upcoming article on damages for discrimination.

Basic Award

A basic award is calculated on the basis of a week’s gross pay. The rules for the calculation of a week’s pay are set out at Articles 16-25 of the 1996 Order. For employees with normal working hours, a week’s pay will usually only include basic pay and guaranteed overtime. Other forms of overtime, bonus, expenses etc will normally be excluded. However the question of a week’s pay has received considerable recent judicial attention and may be subject to change.

For employee’s without normal working hours, a week’s pay should be calculated in line with article 20 of the 1996 Order. This involves calculating average remuneration over a 12 week reference period excluding weeks where the employee received no remuneration. Whilst the statutory position is a 12 week reference period, there has been recent caselaw to suggest a 52 week reference period may be more appropriate. A week’s pay for the purposes of a basic award is currently capped at £669 for dismissals taking effect after 6 April 2023. This maximum figure is reviewed annually.

To calculate the basic award you should:

• Calculate the number of whole years the claimant has been employed
• Multiply that figure by the “appropriate amount” based on the claimant’s age. The appropriate amount is 1.5 weeks’ pay for periods when the claimant was over 41, 1 week’s pay for periods when the claimant was between the age of 22 and 40 and 0.5 weeks’ pay for periods when the claimant was under 22 (subject to the cap on a week’s gross pay).

For example, a claimant dismissed at 45 years of age with 10 years’ service will be entitled to 4 years at 1.5 weeks’ pay and 6 years at 1 week’s pay totalling a basic award of 12 weeks’ pay.

Basic awards are capped at 20 years’ service.

In the event that the claimant has received a statutory redundancy payment, a basic award may also be discounted by the amount of that payment.

Further detail on the calculation of the basic award can be found at Article 153-156 of the 1996 Order.

Compensatory Award

Compensatory awards do not follow a fixed formula in the same way as basic awards. Rather, Article 157 of the 1996 Order states:

“The amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

The Tribunal therefore has an element of discretion in respect of compensatory awards for unfair dismissal, but compensation will be based on loss and will generally include:

• Awards for immediate loss of earnings
• Future loss of earnings
• Loss of statutory rights and
• Loss of pension.

Immediate loss of earnings may include all loss of earnings from the date of dismissal to the date of the remedy hearing. Where the claimant has secured alternative employment, they will only be able to recover any shortfall between their previous wage and their new wage.

The claimant is under a duty to mitigate their loss which is covered in more detail below.

The Tribunal may award future loss of earnings from the date of the remedy hearing to a future date which the Tribunal believes is just and equitable in the circumstances. Given the length of time it takes for cases to reach a Tribunal hearing, awards for future loss of earnings are not automatic. In cases where future loss of earnings is awarded, the Tribunal must make a judgment as to how long it is reasonably likely to take for a claimant to secure alternative employment. The more specialised the field in which the claimant is engaged, the longer this may take, but there may come a point in time where the Tribunal considers the claimant should take a broader view of their employment options.

Awards for loss of earnings will normally include loss of benefits such as a company car or private health insurance (where the loss can be attributed to the actions of the employer). Equally, the claimant may claim for the loss of a bonus/commission they could reasonably have been expected to receive had they remained in employment. This includes non-contractual or discretionary bonus schemes.

The Tribunal may make an award in respect of loss of statutory rights. This award will generally be in the region of £500. This award reflects that the claimant may have lost rights such as the qualifying period of employment to bring an unfair dismissal claim or the right to a redundancy payment as a consequence of their dismissal.

Finally, the Tribunal may make an award in respect of a claimant’s loss of pension. This can often be a difficult calculation especially when it relates to final salary pension schemes. In cases involving large pension loss claims, it is not unusual that expert actuarial evidence will be required.

Article 157 (4) of the 1996 Order confirms that the claimant is under a duty to mitigate their loss. Common example arguments where a claimant has failed to mitigate their loss are where:

• they have failed to make adequate efforts to find employment or
• they have limited their search to too narrow a field of jobs.

The Tribunal may expect claimants to seek work at a reduced salary to their previous employment and this will have an impact, in particular, on awards for future losses, where the Tribunal will be exercising their own judgment as to how long it would or should reasonably take for a claimant to secure alternative employment.

Compensatory awards for unfair dismissal are subject to a statutory cap of £105,915. This figure is updated annually. The statutory cap does not apply to compensatory awards in discrimination / detriment claims.

Contributory Fault

The basic and contributory award can be reduced by up to 100% in circumstances where

• the employee has unreasonably refused re-engagement
• contributed to their own dismissal

Polkey v AE Dayton Services Ltd

When considering what compensatory award is just and equitable, the Tribunal may make a deduction in line with the above authority known as a “Polkey deduction”.

A Polkey deduction will be considered in cases where the claimant’s dismissal was procedurally unfair but the respondent demonstrates that had they followed a fair procedure, the claimant would have been dismissed in any event.

A Polkey deduction can be up to 100% but will only apply to a claimant’s compensatory award. Respondents may, and often do, argue for reductions in respect of both the claimant contributing to their own dismissal and for a Polkey reduction.

Uplift / reduction – LRA Code

The Tribunal may adjust a compensatory award to reflect non-compliance with the statutory dismissal procedure and/or the LRA code of practice. This adjustment may be up to 50% up or down depending on the severity and / or reasonableness of the breach and whether or not the breach was caused by the claimant or respondent.

Comment

Accurately predicting the likely level of damages in Tribunal proceedings is essential when deciding on how to best resolve a dispute. The Tribunal’s discretion and the impact of the claimant’s efforts in mitigation will have some impact of the ultimate level of damages recovered. However, expert professional advice will provide clarity on the extent of an organisation’s exposure in a given case.

If you require any assistance in determining or calculating damages in a specific case please feel free to reach out to the author.

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