303.Various payments and employment tribunal awards which fall due under the 1992 Act and the 1996 Act are subject to minimum and/or maximum limits. Currently some of these limits are required to be reviewed each calendar year (for example, the limit on a week’s pay used in calculating statutory redundancy payments and the basic and additional awards which may be made when unfair dismissal is found). Other awards and payments are not required to be reviewed annually but may be increased at the Secretary of State’s discretion (for example, the compensatory award in unfair dismissal cases). This section provides that limits on these payments and awards will instead be index linked.
304.Subsection (1) sets out the awards and payments to be index linked. Subsection (2) provides that the limits on these payments and awards will be linked to changes in the retail prices index, using the September index in each year as the reference point, with changes being made by order as soon as is practicable. Subsection (3) provides that limits will be rounded up when they are varied as a result of subsection (2). Subsection (5) defines the retail prices index for the purposes of the section and makes provision for what should happen in the event of non-publication. Subsection (6) sets out the order-making procedure for orders under subsection (2).
305.Subsection (4) substitutes a maximum limit of £50,000 (subject to subsection (2)) on the compensatory award for the current limit of £12,000 (section 124(1) of the 1996 Act as amended by the Employment Rights (Increase of Limits) Order 1998 (SI 1998/924)). The great majority of compensatory awards are currently below the £12,000 limit but in a few cases this limit means that individuals cannot be fully compensated for their loss. The raising of the limit will substantially reduce the likelihood of this happening. (In Fairness at Work, the Government announced its intention to abolish the limit altogether, but it was subsequently decided not to do this in the light of concerns expressed during the consultation about ill-founded claims, burdens on business and employment prospects.)
Special awards are dealt with in sections 118 and 125 of the 1996 Act and sections 157-158 of the 1992 Act; additional awards are dealt with in section 117 of the 1996 Act; and compensatory awards are dealt with in sections 118, 123-124 and 126-127 of the 1996 Act.
Commentary on Sections Miscellaneous Section 34: Indexation of amounts, &c.