Unfair dismissal payout capped at one year's salary Under the changes, being introduced this summer, workers who win a claim for unfair dismissal would receive a maximum payout equivalent to one year's salary. At present, the compensation limit is £72,300 - due to rise to £72,400 in February. But under the new rules, a worker who earns £25,000 a year would only stand to get up to £25,000 compensation - not up to £72,400. Plans to introduce an independent health assessment service were also announced, aimed at helping firms tackle long-term sickness absence. Businesses welcomed the employment changes. Neil Carberry, CBI director of employment, said: "Delays in the current tribunal system are the single biggest confidence killer for firms wanting to grow. No one wants disputes to end in tribunals, particularly small businesses, so the system needs to promote early settlement more actively. The current cap on unfair dismissal payouts is many times higher than the average sums awarded, giving workers unrealistic and inflated expectations of what a claim is worth. It's right that the new cap is linked more explicitly to an employee's earnings. This will give businesses clarity about the potential costs and will scrap the perverse incentive for workers not to settle in the hope of getting a higher award. Dr Adam Marshall, policy director at the British Chambers of Commerce, said: "The average compensation awarded for unfair dismissal is less than £6,000, but the maximum award of £72,300 often creates unrealistic expectations, making claimants less likely to settle, and employers less willing to risk defending themselves. The proposed cap will make employers more confident in recruiting and also in defending themselves, if accused of ending employment unfairly. However, given how few people earn £72,300, we question the merits of maintaining this damaging headline figure. Richard Fox, head of employment law at Kingsley Napley, said: "Employers may welcome much of what is proposed. For example, the cap on unfair dismissal awards of 12 months or the statutory cap, whichever is the lower, and the new settlement agreements procedure. The Institute of Directors, however, said the Government could have gone further by reducing the overall maximum compensation limit from £72,400 down signficantly.