In recent weeks, we have seen an increase in the statutory cap on unfair dismissal compensation, as well as an increase in the amount you can claim for injury to feelings in successful discrimination claims. So what does this mean for employers in terms of cold, hard cash?

Unfair Dismissal claims

Until recently, the maximum amount an employee could usually claim as compensation for unfair dismissal was capped at a year’s pay or £118,223 (whichever is lower). However, in relation to dismissals occurring on or after 6 April 2026, the cap increased to a year’s pay or £123,543. At the same time, the limit on a week's pay for statutory redundancy payment (and ‘Basic Award’) purposes rose from £719 to £751. This means that the maximum statutory redundancy payment will now be £22,530 and the maximum value of a ‘normal’ unfair dismissal claim (Compensatory Award plus Basic Award) will be £146,073.

Discrimination claims

Where a person successfully claims unlawful discrimination, as well as seeking compensation for any financial loss they suffer, the employee can also claim compensation for injury to feelings. Putting a cash value on this element of an employee's claim can seem rather subjective. However, over time, a set of agreed guidelines have been developed as a way of categorising relevant claims and deciding how much compensation ought to be awarded. These are often referred to as the Vento guidelines, named after one of the cases which gave rise to them.

Under the Vento guidelines, cases are placed into one of three bands: the ‘lower band’ (for less serious cases), the ‘Middle band’ and the ‘Upper band’ (for the most serious cases). Each year, the rates at which injury to feelings awards are likely to be made in relation to each of these bands are revised. In relation to claims filed on or after 6 April 2026, the bands have been increased as follows:

• Cases falling into the ‘lower band’ are now likely to give rise to awards of £1,300 to £12,600;
• Cases falling into the ‘middle band’ are now likely to give rise to awards of £12,600 to £37,700; and,
• Cases falling into the ‘upper band’ are now likely to give rise to awards of £37,700 to £62,900.

It is also worth bearing in mind that in very exceptional cases, it is just possible that compensation in excess of £62,900 could be awarded.

Need more help?

When assessing the potential value of Employment Tribunal claims (actual or threatened), factoring in these increased risks is very important. If you need our help, then please get in touch. We’d be keen to hear from you.