New employment rates and limits from April 2023

In April 2023, the latest round of annual increases relating to the maximum awards available at Employment Tribunals and other statutory rate increases, such as statutory sick pay and the national minimum wage, take effect. Perhaps not unsurprisingly given the current inflationary environment, the increases are significantly higher than in previous years, most notably in respect to the compensatory award for unfair dismissal which benefits from an inflation-based increase of over 12% taking its limit to £105,707 (up from £93,878 in 2022).  

We set out below the key rates and limits that employers should be aware of.  

1.    Increase of limits on tribunal awards

Under the Employment Rights (Increase of Limits) Order 2023, the following new figures will apply from 6 April 2023:

• the statutory limit on a week’s pay, which is used to calculate statutory redundancy and the basic award for unfair dismissal, will increase from £571 to £643; and

• the maximum compensatory award for unfair dismissal will increase from £93,878 to £105,707. Note that unfair dismissal compensation remains capped at the lesser of the compensatory award or a year’s pay.

Employers facing potential Employment Tribunal claims with an effective date of termination of 6 April 2023 onwards should therefore be mindful of the significant increase to the compensatory award, in particular, when considering any potential exposure to unfair dismissal claims and during the course of any settlement discussions regarding such claims.

2.     Increases to other statutory rates

Employers should also be aware of the following statutory employment rate increases.

• from 10 April 2023, statutory maternity, paternity and adoption pay will increase to £172.48 per week (or 90% of the employee’s weekly earnings, if lower) (up from £156.66);
• from 10 April 2023, statutory sick pay will increase to £109.40 per week (up from £99.35); and
• from 1 April 2023, the national living wage will increase to £10.42 per hour (up from £9.50).

Employers should ensure that they are ready to implement the changes above from the relevant dates.

See the Social Security Benefits Up-rating Order 2023 and the National Minimum Wage (Amendment) Regulations 2023 for further information.

3.    Increased Vento bands apply from 6 April 2023

On 24 March 2023, the Presidents of the Employment Tribunals published updated guidance on Employment Tribunal awards for injury to feelings and psychiatric injury, which sets out the revised Vento bands of compensation for the 2023/24 tax year, as updated for inflation.

For claims presented on or from 6 April 2023, the new Vento bands will be as follows:

1. a lower band of £1,100 to £11,200 for less serious cases in which the discriminatory act is an isolated or one-off incident (up from £990 to £9,900 in 2022);
2. a middle band of £11,200 to £33,700 for cases that do not merit an award in the upper band (up from £9,900 to £29,600 in 2022);
3. an upper band of £33,700 to £56,200 for the most serious cases, for example, where there has been a lengthy campaign of discriminatory harassment (up from £29,600 to £49,300 in 2022);
4. with the most exceptional cases capable of exceeding £56,200 (up from £49,400 in 2022).

Given current inflationary pressures, the increase to the upper band is particularly notable, and any employer facing claims where the Vento bands are in play post-6 April 2023 should therefore be mindful of these increases.

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