When Should Compensation be Grossed Up?

When an unfair dismissal award exceeds the £30,000 tax free threshold, any grossing up of that award to allow for tax must be done before the statutory cap is applied, the EAT has held in Hardie Grant London Ltd v Aspden [2011] UKEAT/0242.

The Claimant in this case won her constructive dismissal claim and was awarded the maximum compensatory award, which was £65,300 at that time.  The Tribunal grossed up the award to compensate for the tax that would be payable above £30,000, and this resulted in an overall award of £87,166.67.  The EAT held that the Tribunal was wrong to make an award in excess of the statutory cap and reduced the compensatory award to the cap of £65,300.  It said that the correct approach in an unfair dismissal claim was to apply the statutory cap at the end of the calculation - after any grossing up has been done.