So long statutory cap

Sally Bird, Partner

Amidst the raft of changes that are coming down the line, April marks the annual increase of various statutory limits in employment law.

The following increases to compensation limits for certain tribunal awards and other statutory payments will be effective from 6 April 2026.

• The limit on a week’s pay increases from £719 to £751.
• The maximum compensatory award for unfair dismissal increases from £118,223 to £123,543.
• The minimum basic award for certain unfair dismissals (including health and safety dismissals) increases from £8,763 to £9,157.
• The limit on the compensatory award for failure to have a written tips policy, or for failure to allocate and pay tips fairly, increases from £5,135 to £5,366.

In cases involving unfair dismissal, the new figures will apply where the effective date of termination falls on or after 6 April 2026.

I may be alone and rather sad in waiting with eager anticipation each March to see how much the statutory cap is going up, because it is a number that us employment lawyers memorise and use many times each week in the course of giving advice-particularly when outlining the “worst case scenario”. This year sees the maximum cap for awards of compensation for ordinary unfair dismissal increase from £118,223 to £123, 543”. Perhaps we should treasure this moment, because this increase in the statutory cap on the compensatory award for unfair dismissal will be the last we see for a while (certainly whilst Labour remain in government) when the cap is abolished altogether (alongside the reduction in the qualifying period for unfair dismissal from 2 years to 6 months) from 1 January 2027.

Strategic action ahead of D-day

As 2026 progresses, commentators have questioned whether unemployment rates will rise as employers move to cull shorter serving employees ahead of 1 January 2027 and before they acquire a right to claim unfair dismissal after only 6 months in post.

The risk analysis is not just about reviewing length of service. Focus should also be directed towards higher paid senior executives who may be well past two years, whose performance or fit is in question, where the removal of the statutory cap could represent a very significant uplift in potential exposure from an unfair dismissal claim. Not only that, but it is also going to provide those employees with significantly more leverage in negotiations if a pragmatic decision is taken to do down the route of a pre-termination discussion, making settlements more expensive.

Now is the time to start this strategic review and act before the risks and exposure escalate. Our employment team has a wealth of experience in senior executive matters and can provide expert insight and guidance. Please contact Sally Bird or Claire Hollins.

Other changes to statutory rates

The Social Security Benefits Up-rating Order 2026 (SI 2026/148) was made on 2 March 2026. This Order implements the following increases to statutory payments:

• Statutory maternity pay will increase from £187.18 to £194.32 on 5 April 2026.
• Maternity allowance will increase from £187.18 to £194.32 on 6 April 2026.
• Statutory paternity, adoption, shared parental, parental bereavement and neonatal care pay will increase from £187.18 to £194.32 on 6 April 2026.
• Statutory sick pay will increase from £118.75 to £123.25 on 6 April 2026.