Unfair Dismissal Compensation: Enhanced Redundancy Pay and 'Polkey' Reductions
The EAT ruled on how enhanced redundancy payments interact with 'Polkey' reductions in unfair dismissal cases, impacting compensation calculations.
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Tribunal Clarifies Enhanced Redundancy Payments in Unfair Dismissal Cases
The Employment Appeal Tribunal (EAT) has ruled on a case concerning the calculation of compensation for unfair dismissal where an enhanced redundancy payment was made and a 'Polkey' reduction applied. The case, Mogane v Bradford Teaching Hospitals NHS Foundation Trust (No. 2), examined how these factors interact to determine the final compensatory award.
Mrs. Mogane, a Respiratory Research Nurse, was unfairly dismissed for redundancy. She received an enhanced redundancy payment exceeding the statutory minimum by £17,431.88. The Employment Tribunal (ET) found a 50% chance that she would have been fairly dismissed even with a proper selection process – applying a 'Polkey' reduction of 50% to her loss of earnings.
The Key Dispute: Calculating Compensation
The central issue before the EAT was whether the ET correctly assessed the compensatory award. Mrs. Mogane argued that the ET should have calculated her loss by adding 50% of her earnings loss to 50% of the enhanced redundancy payment before any deductions. The EAT rejected this argument, stating it would give credit for something already received.
The appellant also contended that the section 123(7) deduction for the enhanced redundancy payment should itself be subject to the 'Polkey' discount, meaning only 50% of the enhanced payment should be deducted. The EAT acknowledged it was bound by the Court of Appeal's decision in Digital Equipment Co. Ltd v Clements (No.2), which mandates that the full enhanced redundancy payment be deducted after the 'Polkey' reduction.
EAT's Reasoning
Mr Justice Cavanagh, presiding over the EAT, emphasised that including the enhanced redundancy payment in pre-'Polkey' loss calculations would be incorrect, as the claimant actually received the payment. He stated that it is not “just and equitable to calculate the compensation due to the Claimant by reference to something that she has not lost at all.
The EAT affirmed that section 123(3) of the Employment Rights Act 1996 addresses situations where a claimant loses a redundancy payment due to unfair dismissal, not cases where a payment was actually received. The appeal was subsequently dismissed.
The EAT further noted that the goal of the legislation on redundancy payments is to ensure that employers are not 'penalised' for offering redundancy payments that are more generous than the statutory minimum.
Read the entire judgement here: Mrs S Mogane v Bradford Teaching Hospitals NHS Foundation Trust [2025] EAT 68
