Interest and tax 


If the sum awarded remains unpaid 42 days after the tribunal decision, interest is payable on amounts outstanding.


A compensation payment for unfair dismissal under a compromise agreement is tax free up to £30,000, even if the employee is reinstated, as long as it is genuine compensation for loss of the job, rather than earnings or a payment for services (HM Inspector of Taxes v Clayton [2005] IRLR 108).


In 2016, the government launched a consultation on “simplifying” the tax treatment of termination payments, and the 2016 Budget, included a commitment to introduce compulsory national insurance contributions on termination payments over £30,000.

Section 160 of TULRCA gives the tribunal power to order that any award of compensation for unfair dismissal be paid by the union instead of the employer if the tribunal decides that the union induced the employer to dismiss.