What deductions are made to an unfair dismissal award of damages?

Order of deductions in an unfair dismissal award

The order of deductions to an unfair dismissal award is taken from the case of Digital Equipment Co Ltd v Clements (No.2) [1998] IRLR 134. Deductions should be made in the following order:

  • Deduction of any payment already made by the employer as compensation for the dismissal (for example an ex gratia payment), other than an enhanced redundancy payment.
  • Deduction of sums earned by way of mitigation, or to reflect the employee’s failure to take reasonable steps in mitigation.
    Percentage deduction under the principle in Polkey v AE Dayton Services [1987] IRLR 503 (that is, where an employer has dismissed for a substantively fair reason but has failed to follow a fair procedure, the employer may be able to argue that the compensatory award should be reduced on the basis that a fair procedure would have resulted in a dismissal anyway).
  • A reduction of up to 25% where an employee unreasonably failed to comply with the ACAS Code of Practice on Discipline and Grievance Procedures. This would include, for example, where you resigned and are claiming constructive dismissal without first lodging a grievance. Another example is where you do not exercise your right to appeal in misconduct cases. As an aside, there could also be an increase in an award by up to the same percentage if an employer has not followed the ACAS Code.
  • A reduction for any contributory fault on the part of the employee
  • A reduction of any enhanced redundancy payment to the extent that it exceeds the basic award.
  • Finally (although not a deduction as such), there needs to be the application of the statutory cap of £115k or 52 weeks gross salary- whichever is the lower.

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