In Hardie Grant London Limited v Aspden, the EAT has made it clear (if it wasn’t already) that the statutory limit on the amount of compensation that can be recovered for unfair dismissal must be applied after, not before, any ‘grossing up’ calculation has been done. As usual, I’m indebted to Daniel Barnett for his email alert on this case.
Grossing up is the calculation that you do to work out what you need to receive so that, after tax, the part of your award that you get to keep properly compensates you for your net losses. If your claim for lost earnings amounts to less than £30,000, you don’t have to worry about it: you won’t have to pay tax on it anyway. But if you are claiming more than £30,000 in lost earnings, although the tribunal will award you your net losses, the amount by which your award exceeds £30,000 will still be liable to be taxed as income.
It’s not really difficult to calculate how much more you need to be paid in order to be left with the right amount after tax – but it is quite fiddly, and will depend in part on your income for the relevant year from other sources. If anyone knows of a set of good, clear step-by-step instructions for this calculation (or better still, an online calculator that asks you for the relevant information and then spits out the answer), please comment.