Each April, statutory limits on employment tribunal compensation are updated in line with inflation and economic changes. These increases can have significant financial implications for employers involved in claims such as unfair dismissal, redundancy, or trade union disputes.
From 6 April 2025, new rates will apply to compensation caps, redundancy pay calculations, and statutory payments. Understanding these changes is crucial for HR professionals, in-house counsel, and business leaders to ensure compliance and budget accordingly.
In this blog, we break down the key changes, explain their legal basis, and offer practical advice on how employers can prepare.
What Are the 2025 Tribunal Compensation Changes?
From 6 April 2025, the following key changes to tribunal award limits and statutory payments are set to apply:
- Cap on a week’s pay for redundancy and basic awards increases from £700 to £719
- Maximum compensatory award for unfair dismissal rises from £115,115 to £118,223
- Statutory guarantee pay increases from £38 to £39 per day
Why Are These Changes Important?
These updates affect the cost of resolving disputes and can impact the total liability employers face in tribunal cases. For example:
- The maximum basic award in unfair dismissal cases will now reach £21,570
- Redundancy calculations will result in higher payouts, especially for long-serving employees
- Statutory obligations like guarantee pay during lay-offs slightly increase costs
Legal Framework and Recent Changes
These changes are made annually under Section 34 of the Employment Relations Act 1999 and Section 227 of the Employment Rights Act 1996, aligning statutory rates with inflation and earnings growth.
Other notable increases include:
- Trade union exclusion compensation (s.174 TULRCA 1992): rises from £13,032 to £13,384
- Failure to follow tipping laws: penalty cap increases from £5,000 to £5,135
- Unlawful inducement related to union activity or collective bargaining: now capped at £5,735 (up from £5,584)
These figures apply to dismissals or relevant events where the effective date is on or after 6 April 2025. If the dismissal occurs before that date, the previous rates apply, even if the award is made later.
What Employers Need to Know
Employers should:
- Review redundancy policies and ensure payment calculations reflect the new weekly pay cap
- Factor in higher tribunal compensation exposure when managing risk and budgeting for litigation
- Update internal HR and payroll systems before 6 April 2025 to reflect the new limits
- Train HR staff and line managers on the increased costs and compliance requirements
Common Mistakes and How to Avoid Them
- Using outdated figures when calculating statutory redundancy or settlement offers
→ Solution: Always verify current caps using official government updates. - Assuming the new limits apply to all cases
→ Solution: Check the effective termination date — old limits apply if it’s before 6 April 2025. - Failing to update employment templates or internal policies
→ Solution: Audit all HR documentation annually around April.
Key Takeaways:
- Tribunal compensation and redundancy caps increase from 6 April 2025
- New cap on a week’s pay: £719
- New maximum unfair dismissal compensatory award: £118,223
- Other awards under the Employment Rights Act and TULRCA also increase
- Employers must apply the correct limits based on the dismissal date
