S Mogane v Bradford Teaching Hospitals NHS Foundation Trust (No 2)

Where an employee has received an enhanced redundancy payment, it is not a loss for the purposes of a compensatory award for unfair dismissal. A tribunal must assess the actual loss under section 123(1) of the Employment Rights Act 1996, including a genuinely lost future entitlement to enhanced redundancy pay where applicable.

Any redundancy payment exceeding the basic award must then reduce the compensatory award in full under section 123(7). That deduction follows any Polkey reduction; it is not itself apportioned by the chance that a fair procedure would have produced a dismissal.

The claimant was unfairly dismissed for redundancy after being selected from what should have been a pool of two employees. She had received an enhanced contractual redundancy payment exceeding her statutory entitlement by £17,431.88.

On remittal following an earlier EAT decision, the Employment Tribunal found a 50% chance that a fair selection process would still have dismissed her. It applied a 50% Polkey reduction to agreed losses and then deducted the full enhanced-payment excess under section 123(7) of the Employment Rights Act 1996.

The appeal concerned whether the enhanced payment should first be treated as part of the claimant's loss and whether the statutory deduction should itself be reduced by the Polkey percentage.

1. Appeal dismissed. The Employment Tribunal correctly calculated the compensatory award.

2. The statutory task under section 123(1) of the Employment Rights Act 1996 is to compensate actual loss justly and equitably, not to confer a windfall. An enhanced redundancy payment actually received is a benefit of the dismissal, not a loss caused by it. It cannot be added to loss of earnings before a Polkey reduction.

3. Section 123(3) permits compensation for a lost entitlement or potential entitlement to redundancy pay above the basic award. It covers, for example, a claimant deprived by an unfair dismissal of a later or larger enhanced redundancy payment. It does not make an enhanced payment already received an element of loss.

4. The claimant's proposed calculation wrongly combined incompatible scenarios: continued employment and receipt of redundancy pay. The latter was not a counterfactual; it was what occurred. The proposed method would therefore overstate loss.

5. Digital Equipment Co. Ltd v Clements (No.2) [1998] ICR 258 was binding. It requires the excess redundancy payment to be excluded when ascertaining loss and then deducted from the compensatory award under section 123(7), after the award has otherwise been calculated. The deduction is the full excess, notwithstanding the 50% Polkey reduction.

6. MacCulloch v Imperial Chemical Industries was distinguishable. There the relevant loss was a larger future enhanced redundancy payment which the claimant would have received absent the unfair dismissal. It did not support adding a payment actually received to present loss, and it confirmed that the actual enhanced payment is deducted once under section 123(7).

• Employment Appeal Tribunal: dismissed the claimant's appeal against the remedy calculation: [2025] EAT 68.

• Employment Tribunal: Employment Judge Ayre held that a fair procedure carried a 50% chance of dismissal, applied that Polkey reduction, and deducted the enhanced redundancy-payment excess under section 123(7) of the Employment Rights Act 1996.

• Employment Appeal Tribunal: an earlier appeal allowed the claimant's appeal on liability, substituted a finding of unfair dismissal, and remitted remedy: [2022] EAT 139; [2023] IRLR 44.

• Employment Tribunal: had originally dismissed the unfair-dismissal claim and other claims.