Even if you think you have dismissed an employee fairly, they could decide to bring an unfair dismissal claim because they believe that:
- the reason you gave for the dismissal wasn't the real one
- you dismissed them for an unfair reason - see unfair dismissal
- you acted unreasonably, eg by failing to give the employee plenty of warning in the run-up to taking the decision to dismiss them
If you think you may have to dismiss an employee, make sure that you:
- Have a fair reason for dismissal.
- Follow - at the very least - the statutory dismissal procedure. If you unreasonably fail to follow the statutory dismissal procedure and the issue is heard at tribunal, any compensation awarded to the employee could be increased by between 10 and 50 per cent.
- Follow any contractual disciplinary/dismissal procedure you may have, as well as the guidance outlined in the Labour Relations Agency (LRA) Code of Practice on Discipline and Grievance Procedures. Your contractual procedure should comply with the code.
Penalties for unfair dismissals
If an employee has been unfairly dismissed, the employer may be ordered to reinstate or reengage the employee. This however is an exceptional outcome.
Invariably, a tribunal or arbitrator will award compensation, made up of a basic award which depends on the employee's age, gross weekly pay and length of service, and a compensatory award.
They can also make an additional award if you fail to follow an order to reinstate or re-engage the employee.
Apart from in health and safety and whistleblowing cases, there is a limit on the amount which can be awarded for unfair dismissal. For the latest limits on awards, see our table of current tribunal and arbitration compensation limits.
The Labour Relations Agency Arbitration Scheme
The Labour Relations Agency (LRA) Arbitration Scheme provides an alternative to having a case heard by a tribunal to resolve an employment related dispute (for example, claims of unfair dismissal, breach of contract or discrimination etc).
The scheme is quicker, confidential, non-legalistic, less formal and more cost effective than a tribunal hearing.
Under the scheme, an arbitrator’s decision is binding as a matter of law and has the same effect as a tribunal.