The law is stated as at 18 December 2008
Why are damages for wrongful dismissal claims sometimes so substantial and are bonuses included?
Most damages for wrongful dismissal claims are not substantial at all. However, the press does from time to time highlight substantial awards of damages for wrongful dismissal claims. In a small minority of cases the damages can be vast because either the employee had an extremely long contractual notice period, or the employee was a high earner, often with a significant bonus package.
Damages for wrongful dismissal will be assessed by reference to loss suffered during the period of notice which the employer should have given. If a large bonus fell due during the notice period then large sums will be payable by the employer. The cases in which wrongful dismissal claims are highly contentious usually involve senior employees with valuable remuneration packages who are dismissed without being given full contractual notice.
Attempting to design a bonus scheme under which the employer does not have to pay pro rata bonuses during a notice period can be very difficult and careful legal advice should always be taken. The basic principle is that loss of contractual bonus falling due in the notice period will be payable. Disputes frequently arise concerning whether bonus schemes are contractual or genuinely discretionary. For example, see Clark v Nomura International Plc [2000] IRLR 766 where a wrongfully dismissed city employee recovered £1.35m damages for loss of bonus.
While every care has been taken in compiling these notes, the CIPD cannot be held responsible for any errors or omissions; the notes are not intended to be a substitute for specific legal advice.