Annual increase to tribunal compensation limits from 6 April 2026, what employers need to know

The Government has confirmed the annual increase to employment tribunal compensation limits and certain statutory payments, with the new rates applying to dismissals that take effect on or after 6 April 2026.

At first glance, these annual uplifts can seem like a routine update. In practice though, they matter. For employers dealing with dismissals, redundancies or settlement discussions, even small increases to statutory limits can affect decision making, risk assessment and cost planning.

Two of the most important changes relate to unfair dismissal compensation and the statutory limit on a week’s pay.

From 6 April 2026, the maximum compensatory award for unfair dismissal will rise from £118,223 to £123,543. This is the cap that currently applies to the compensatory element of many unfair dismissal claims, subject to the usual rule that compensation is limited to the lower of the statutory cap or 52 weeks’ gross pay.

That means employers facing a potential unfair dismissal claim may need to reassess the value of that risk where the dismissal date falls on or after 6 April 2026.

It is also worth keeping one eye on what comes next. Following the Employment Rights Act 2025, which received Royal Assent in December 2025, the statutory cap on compensatory awards for unfair dismissal is due to be removed from 1 January 2027. If that change comes into force as expected, employers will be looking at a very different unfair dismissal landscape, with compensation no longer restricted by the current statutory maximum.

The statutory limit on a week’s pay is also increasing, rising from £719 to £751 from 6 April 2026.

This figure is used in a number of employment law calculations, including the basic award for unfair dismissal and statutory redundancy pay. In simple terms, where these payments apply, dismissals are likely to become more expensive.

There is also a smaller increase to the statutory guarantee payment, which rises from £39 to £41 per day. This applies where an eligible employee is laid off or put on short-time working and is capped at five days in any three-month period.

For employers, the practical message is clear. If you are currently considering dismissals, redundancies or settlement options, it is important to check which statutory limits apply based on the effective date of termination. A dismissal that takes effect on or after 6 April 2026 may carry a higher level of financial exposure than one taking effect before that date.

These annual increases are a useful reminder that employment law costs rarely stand still. Building the new rates into your planning now will help you make better informed decisions during the 2026/27 year.

If you need any assistance with any aspect of redundancies, we offer fixed price redundancy for early years employers. For more information call the team on 01527 909436.