Employment Tribunal Compensation: How Awards Are Calculated

A successful unfair dismissal claim produces two separate awards, calculated independently under the Employment Rights Act 1996.

• The basic award (section 119) is a formula payment for lost service. It does not depend on proving any financial loss — you receive it even if you started a better-paid job the following week.
• The compensatory award (section 123) is "such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained". This is the part that reflects what the dismissal actually cost you.

Discrimination claims under the Equality Act 2010 work differently again: there is no basic award, no qualifying period, no cap, and an additional head of damages for injury to feelings. Many claimants bring both — an unfair dismissal claim and a discrimination claim on the same facts — in which case the tribunal must avoid double recovery of the same losses while allowing the injury-to-feelings element to stand on its own.

Two other awards appear less often: an additional award of 26 to 52 weeks' pay where an employer refuses to comply with a reinstatement or re-engagement order, and a protective award of up to 180 days' pay for failure to consult on collective redundancies.

Section 119 counts backwards from the effective date of termination and allows, for each complete year of employment:

• 1.5 weeks' pay for each year in which you were aged 41 or over;
• 1 week's pay for each year in which you were aged 22 to 40;
• 0.5 week's pay for each year in which you were under 22.

Only the most recent 20 years count (section 119(3)). A week's pay is your normal gross weekly pay, capped by section 227 at £751 for terminations on or after 6 April 2026. The maximum basic award is therefore 20 years at 1.5 weeks — 30 weeks — multiplied by the cap: £22,530. The figure is identical to the maximum statutory redundancy payment, and the calculation is the same one set out in our redundancy pay calculation guide.

Two adjustments matter. Any statutory redundancy payment already received is set against the basic award, so a redundancy dismissal that is also unfair usually produces no additional basic award. And for certain dismissals — trade union membership or activities, acting as an employee representative, health and safety duties, or being a pension scheme trustee — a minimum basic award of £9,157 applies for the 2026/27 year under section 120(1) of the 1996 Act and section 156(1) of the Trade Union and Labour Relations (Consolidation) Act 1992.

The compensatory award is built by adding up the loss the dismissal actually caused. In practice you set it out in a schedule of loss, a document the tribunal will expect you to produce and the respondent will attack line by line. The standard heads are:

• Immediate loss — net pay from the date of dismissal to the hearing, less anything earned in the meantime.
• Future loss — net pay for the period the tribunal finds it will realistically take you to get back to a comparable salary. This is a judgement about the labour market and your evidence of job-hunting, not a fixed multiplier.
• Loss of pension rights — often the largest single line in a long-service defined-benefit case; the Presidential guidance on pension loss sets out the approaches.
• Loss of benefits — car, medical insurance, bonus, share schemes, valued at their real cost to you.
• Loss of statutory rights — a conventional modest sum (commonly a few hundred pounds) reflecting the need to build up two years' service again.
• Expenses reasonably incurred in seeking new work.

The total is then capped by section 124(1ZA) at the lower of two figures: £123,543, or 52 times a week's pay. For most claimants the 52-week limb bites first — someone earning £30,000 is effectively capped at around £30,000 regardless of the headline figure. Note that a week's pay for this limb is not subject to the £751 cap; that cap belongs to the basic award.

Section 124(1A) removes the cap entirely where the dismissal is unfair by virtue of section 100 (health and safety) or section 103A (making a protected disclosure). Uncapped whistleblowing and discrimination claims are where the very large reported awards come from.

Compensation for discrimination is awarded under section 124 of the Equality Act 2010 and is not capped. It has three possible elements: financial loss calculated on ordinary tort principles, injury to feelings, and — where there is a diagnosed condition supported by medical evidence — personal injury for psychiatric harm.

Injury to feelings is assessed using the Vento bands, uprated each April by Presidential Guidance. For claims presented on or after 6 April 2026 the Ninth Addendum sets them at:

• Lower band: £1,300 to £12,600 — less serious cases, such as an isolated or one-off act.
• Middle band: £12,600 to £37,700 — cases that do not merit an award in the upper band.
• Upper band: £37,700 to £62,900 — the most serious cases, such as a lengthy campaign of harassment.
• The most exceptional cases are capable of exceeding £62,900.

The band is chosen by reference to the effect on you, not the employer's culpability, so evidence matters: a GP record, a diary, a witness who saw the change in you. A single award covers the whole course of discriminatory conduct rather than one award per incident.

Three adjustments do most of the work between a schedule of loss and the sum actually awarded.

The Acas Code adjustment. Section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 lets the tribunal increase an award by no more than 25% where the employer unreasonably failed to comply with a relevant Acas Code of Practice, and reduce it by up to 25% where the employee did. It applies only to the jurisdictions listed in Schedule A2 — which include unfair dismissal, discrimination, and unlawful deduction from wages, but not, for example, a claim for a statutory redundancy payment. It is discretionary and calibrated to how serious the breach was: a complete failure to hold any disciplinary meeting attracts far more than a technical slip.

The Polkey reduction. Where a dismissal is unfair only because the procedure was defective, the tribunal asks what would have happened had a fair procedure been followed, and reduces the compensatory award by the percentage chance you would have been dismissed anyway. The reduction can be 100% where dismissal was inevitable. It affects the compensatory award only, never the basic award.

Contributory fault. Where your own blameworthy conduct caused or contributed to the dismissal, the tribunal reduces the basic award under section 122(2) and the compensatory award under section 123(6) by such proportion as it considers just and equitable. The two percentages need not match.

Order matters. Reductions apply to the calculated loss before the statutory cap — section 124(5) makes the cap bite on the amount the tribunal would otherwise award after any reduction required by an enactment or rule of law.

Mitigation. Section 123(4) applies the common-law duty to mitigate: the tribunal will not compensate loss you could reasonably have avoided. In practice you must look for comparable work and be able to prove it — keep a dated log of applications, agency registrations, and responses. The burden is on the employer to show you failed to mitigate, but an empty job-search record makes that easy. Refusing a genuinely suitable job offer, including a reasonable offer of re-employment from the same employer, can end your future loss at that date.

Tax and recoupment. The first £30,000 of a termination payment that is not otherwise taxable is generally free of income tax, and awards are calculated on net figures for the period to the hearing, then grossed up where the total is taxable. If you claimed Universal Credit or Jobseeker's Allowance during the loss period, the recoupment regulations let the Department for Work and Pensions reclaim those benefits out of the "prescribed element" — that portion is paid to the Department, not to you.

Interest. Discrimination awards carry interest under the Employment Tribunals (Interest on Awards in Discrimination Cases) Regulations 1996: on injury to feelings, from the date of the act complained of; on other sums, from the mid-point of the loss period. For awards generally, the Employment Tribunals (Interest) Order 1990 provides that any sum still unpaid after 42 days from the decision day carries simple interest at the rate specified in section 17 of the Judgments Act 1838 — currently 8% a year.

Enforcement. A tribunal award is not self-executing. If the employer does not pay, you can use the free government Employment Tribunal Penalty Scheme, apply for a warrant of control through the county court, or use High Court enforcement. Insolvency is the real risk: check the respondent's finances before turning down a payable settlement for a larger paper award.