Basic Award Set-off for Redundancy

In what was described by HHJ McMullen QC as "an arcane corner of the law relating to compensation for unfair dismissal", the EAT has held that a payment made by an employer, which purports to be a redundancy payment, cannot be set-off against the basic award in an unfair dismissal claim.

In Bowyer v Siemens Communications, Mrs Bowyer was dismissed on grounds, purportedly, of redundancy. The tribunal found that the dismissal was procedurally and substantively unfair and - significantly - that the real reason for dismissal was not dismissal.

Her financial losses were over £200,000, and were capped at the (then) compensatory award limit of £53,500.

She had been paid, at the time of the dismissal, £6,240 by way of a statutory redundancy payment. The tribunal refused to award a basic award (of £6,240) on the basis of s122(4) of the Employment Rights Act 1996, which states that the basic award should be reduced by the amount of any payment made to the employee on the ground that the dismissal was by reason of redundancy.

The EAT overturned the tribunal's decision, following an older Court of Appeal authority which held that, for s122(4) to be engaged, the dismissal had to actually be on grounds of redundancy. A payment expressed to be in respect of redundancy would not be set-off against the basic award, if the true reason for dismissal was not redundancy.

Normally this will make no difference, since the 'redundancy' payment would be set-off against the compensatory award. But where the compensatory award exceeds the cap, as in this case, it results in the employee receiving a full basic award on top of the 'redundancy' payment she has already had.

Bowyer v Siemens plc, EAT 2005