Basic award compensation: what you need to know

Curious about basic award compensation and whether your Tribunal claim might qualify for it? You’ll find everything you need to know in this guide. 

What is a basic award?

A basic award is a type of compensation that an Employment Tribunal might award to a claimant after a successful unfair dismissal claim.

The award is designed to compensate the claimant for the loss of their employment. 

It’s a fixed sum that’s calculated on the basis of the claimant’s age, their length of service and their weekly pay. 

A basic award can be awarded for successful claims in the following scenarios:

• Unfair dismissal
• Automatic unfair dismissal
• Constructive dismissal

‍How is a basic award calculated?

Based on the claimant’s gross weekly pay at the time they were dismissed, the basic award is calculated the same way as statutory redundancy pay:

• 0.5 week's gross pay for each year of the claimant’s employment before the age 22
• 1 week's gross pay for each year of the claimant's employment between the ages of 22 and 40
• 1.5 weeks' gross pay for each year of the claimant’s employment after the age of 41

However, there are a number of conditions that can affect the final outcome of the calculation:

• Maximum weekly gross pay
• Maximum length of service
• Minimum length of service 

Maximum weekly gross pay

The maximum weekly gross pay that can be taken into account in a basic award calculation is £700. 

If a claimant’s gross weekly pay was more than £700 at the time of their dismissal, their basic award compensation would be calculated on the basis of £700 a week. 

Maximum length of service

The maximum length of service that can be taken into account in a basic award calculation is 20 years. 

If a claimant had worked for an employer for longer than 20 years at the time of their dismissal, their basic award compensation would be calculated on the basis of 20 years of service.

Minimum length of service 

In the vast majority of cases, employees can only claim for unfair dismissal after two years of employment. This means that the basic award is usually calculated with reference to a minimum of two years of service. 

However, there are certain cases where basic award compensation can be awarded to employees with a shorter length of service. One example is when an employee is dismissed for being a trade union representative. In the event of one of these exceptional circumstances, there is a minimum basic award of £8,533.

What is the maximum basic award value?

The maximum amount that can be awarded in basic award compensation is £21,000. However, most claimants are awarded considerably less than this. 

That’s because, in order to receive the maximum amount, a claimant would have to be at least 61 years old and be unfairly dismissed after both:

• working for the same employer for 20 years
• earning a gross weekly pay of at least £700 

Potential reductions to a basic award value

After a basic award has been calculated, the judge may apply reductions to it. This can happen when:

• The claimant failed to follow the employer’s procedures or behaved in a way that contributed to their dismissal
• The claimant unreasonably refused an offer of reinstatement from the employer
• The claimant received a redundancy payment from the employer
• The claimant received an ex gratia payment from the employer as compensation for the dismissal.

Examples of basic award calculations

Let’s take a closer look at how basic award calculations work with some sample claims and calculations. 

Example 1: Loretta’s unfair dismissal 

Loretta was 38 years old at the date of her dismissal. She had worked for her employer for 10 years and her gross weekly pay was £1,000. 

Her basic award was £7,000, calculated as follows:

£700 maximum gross weekly pay x 10 years of employment between the ages of 22 and 40 = £7,000

Note: Because Loretta’s gross weekly pay was more than £700 at the time of her dismissal, her basic award compensation was calculated on the basis of £700 a week. 

Example 2: Henry’s unfair dismissal

Henry was 51 years old at the date of his dismissal. He had worked for his employer for 25 years. His gross weekly pay was £500. 

His basic award was £12,500, calculated as follows: 

• £750 gross weekly pay x 10 years of employment over the age of 41 = £7,500
• £500 gross weekly pay x 10 years’ employment between the ages of 22 and 40 = £5,000
• £7,500 + £5,000 = £12,500

Example 3: Sufian’s constructive unfair dismissal

Sufian resigned with immediate effect on 18 November 2024. He went on to make a successful claim for constructive unfair dismissal. He was 21 years old on the date of his resignation and had worked for his employer for 3 years, earning a gross weekly pay of £455.

Sufian’s basic award was £682.50, calculated as follows:

• 0.5 x £455 weekly pay = £227.50
• £227.50 x 3 years of employment below the age of 22 = £682.50