Sacked? Be sure to get what's coming to you

There's more than one way to get compensation for unfair dismissal. By Ian Hunter

The fat cats of industry who earn telephone number salaries padded out with pension payments, bonuses and cheap share options make the news when they are working and make even more headlines when they are sent packing with compensation packages worth more than many people earn in a lifetime. Their treatment contrasts starkly with the fate of rank-and- file employees who find themselves dismissed on terms that leave them angry and financially distressed. In most cases, their only recourse is to an industrial tribunal.

The news that claims to the industrial tribunals are on the increase will not come as a surprise to disgruntled employees. The Advisory Conciliation and Arbitration Service dealt with 91,500 such cases last year, up 15 per cent on 1994.

Industrial tribunals, however, are not in a position to make massive awards, and anyone tempted to sue ought to know the best that they can expect. It can take up to six months to get a hearing and even a favourable judgment is unlikely to make anyone rich.

On instant dismissal, in breach of contract, employees have two potential claims, one contractual and the other statutory. The starting point for calculating contractual damages is the value of the net salary and fringe benefits that the employee would have received during the notice period. In the absence of an express notice period, employees are entitled to a statutory minimum notice period of up to one week for up to the first two years of employment and, thereafter, to one week's notice for each year of employment up to a maximum of 12 weeks. The length of the notice period is crucial in calculating the size of any damages claim.

Distinct and separate from an employee's contractual rights are those created by statute. Those employees who have completed over two years' continuous employment, on dismissal, have a potential claim for unfair dismissal. The validity of this two-year time limit has been challenged in the Court of Appeal and the matter will now be considered by the House of Lords. It may result in a reduction in the qualifying period of continuous period of service required before a claim can be submitted, but that has yet to be decided.

Awards in respect of unfair dismissal are made up of two parts. First, there is the basic award, which is subject to a maximum of between pounds 102.50 and pounds 315 for each completed year of employment, depending on age. The second tier, the compensatory award, is subject to a maximum of pounds 11,300. The actual amount awarded is at the industrial tribunal's discretion and is decided on the basis of what it considers "just and equitable" in the circumstances.

One major factor in determining the size of the award is the length of time that the industrial trbunal believes it will take the employee to find another job. In most cases, the size of the actual awards made is some way short of the maximum available. Claims in respect of unfair dismissal must also be submitted to the industrial tribunal within three months of the date of dismissal. Late applications are usually time barred.

Contractual claims up to a maximum of pounds 25,000 can also be submitted to the industrial tribunal provided the employee has accrued over two years' continuous employment at the date of dismissal. Alternatively, contractual claims can be pursued in either the county or high courts, depending on the amount claimed. The advantage with this route is that dismissed employees are, subject to satisfying the qualifying conditions, eligible for legal aid. Legal aid is not available in cases brought before the industrial tribunal, which is designed to be more informal than the court system, although many employers and employees are now legally represented.

Organisations such as the London-based Free Representation Unit and local law centres will often assist individuals in presenting their cases. The real advantage with the industrial tribunals, in comparison with the courts, is that cases will usually be heard more quickly. The industrial tribunal claim may, depending on the region, be heard within six months, whereas a court hearing date could be as for away as 18 months to two years.

Redundancy and compensation payments up to pounds 30,000 have traditionally been exempt from tax. In recent months, some Inland Revenue officers have, when an employee is asked to confirm acceptance of a payment in settlement of all claims, sought to argue that the payment should be taxed under a separate tax regime. This threat has now been lifted. But the Inland Revenue will view with suspicion termination payments made to employees nearing retirement. It may seek to argue that in reality the payment is not compensation for loss of employment but is a retirement payment that should be subject to tax.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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