SE12960 - Termination payments and benefits: payments made under the Employment Rights Act 1996 (ERA): unfair dismissal

The most common cause of complaint to Employment Tribunals under ERA is that of unfair dismissal. This means dismissal contrary to the provisions of ERA.

If a complaint is proved a tribunal has first to decide whether the employer should be required to reinstate or re-engage the employee. If reinstatement or re-engagement is ordered under Section 113 ERA, the employer will normally be required to pay compensation in the form of arrears of pay for the period from the date of dismissal until the date of reinstatement or re-engagement. This compensation is taxable under Section 19 (1)1 ICTA 1988 so the employer should operate PAYE.

If the tribunal does not order the employee to be reinstated or re-engaged then it will order the employer to pay compensation for the unfair dismissal under Section 112(4) ERA. It may also order compensation, under Section 117 ERA, where the employer fails to comply with an earlier decision that the employee be reinstated or re-engaged. These awards of compensation are for loss of the employment and liability will arise only under Section 148 ICTA 1988 (see SE13000)

When making a complaint of unfair dismissal, an employee may also claim that the employer failed to provide him with a written statement of the reasons for dismissal. If this claim is upheld, the tribunal may award compensation under Section 93(2)(b) ERA. This compensation is taxable only under Section 148 ICTA 1988.

For details concerning wrongful dismissal, see SE12970