How a compensation award is calculated in a discrimination claim

Since 1 October 2026, the time period for employees to bring an employment tribunal claim for discrimination has increased from three months to six months from an alleged discriminatory act.

Since 30 October 2026, employer responsibilities have also widened with the introduction of liability for harassment by a third party, such as a customer or supplier, and an enhancement to the duty to prevent sexual harassment at work.

These changes, brought in under the Employment Rights Act 2025, are likely to increase the number of claims faced by employers.

Discrimination claims do not just arise because of overt discrimination by the employer; an employer can be liable for another worker’s unwelcome ‘banter’, even if it takes place at an out-of-hours work social event. Overlooking the need to make reasonable adjustments could also create a liability.

If a worker successfully brings a discrimination claim under the Equality Act 2010, the employer will be ordered to pay compensation. Employment tribunals use guidelines to calculate the amount payable.

In this blog, we outline the types of compensation and the factors that influence its calculation.

Purpose compensation

When calculating the amount of compensation to be paid by an employer, tribunals have the aim of putting the individual in the position they would have been in if the discrimination had not happened. Compensation can be for financial losses and for injury to feelings.

Cause of financial losses

The worker has to show a direct link between the discrimination and the financial losses. This can be straightforward, for instance if the worker resigned due to discriminatory treatment and claims loss of earnings.

It can be more complicated if there are other factors at play, for example if the worker went off sick with anxiety and depression, which they say was due to harassment by a colleague, and this resulted in reduced pay. And it can be complicated further, if they already had mental health vulnerabilities.

Does the claimant have to look for work?

Awards can easily mount up when loss of income, benefits in kind, accrued pension benefits and future anticipated pay rises are included. While there is no upper limit on the level of award, the worker bringing the claim must have taken reasonable steps to mitigate losses. Typically, this will mean looking for a new job. If they did not take reasonable steps, the amount of compensation can be reduced; but the employer has to show that they failed to do so.

The employee who will never work again

Claimants sometimes argue that the discrimination has led to them losing their job and that they will never be able to work again. Known as ‘career loss’ cases, tribunals can award compensation for the period until retirement age. Tribunals will usually consider expert medical opinion, market factors and if the worker would have retired early anyway.

Injury to feelings

Injury to feelings awards do not compensate for any financial losses but for the upset caused. They are based on what are known as the ‘Vento guidelines’. The purpose of the award is to compensate the individual, rather than punish the employer. Factors such as the seriousness of the discrimination and the position of the person who discriminated are taken into account, along with the impact on the individual. The amounts are in three bands and are increased annually in line with inflation. Until April 2027 they are set at:

• Lower band - £1,300 to £12,600 - in Fubara v Certus Recruitment Ltd [2022], a black employee experienced anxiety and loss of confidence due to race-related comments made by colleagues such as referring to them listening to ‘ghetto music’ and describing a black job candidate as a ‘roadman’. The award was £8,500 based on 2022 rates for the lower band.

• Middle band - £12,600 to £37,700 - in Lee v R & F Properties QS (UK) [2023], a woman resigned from her job, having accepted a job offer with a new employer. Before starting, she met with the new employer who asked about the ages of her young children and then withdrew the job offer. Her feelings, having recently returned to work from maternity leave, were taken into account and she was awarded £16,500 based on 2022 rates for the middle band.
• Top band - £37,700 to £62,900 - In Meade v Westminster City Council and another [2022], a social worker complained to their regulator about a fellow social worker, Ms Meade, whose posts on social media they found transphobic. This led to the regulator issuing a warning on its website and Ms Meade being suspended from work for 12 months. The employer withdrew its 24-month warning for misconduct after the regulator overturned its warning on appeal. However, the employer did not expressly revoke the finding of misconduct. Ms Meade argued she had been discriminated against for her expression of her gender-critical beliefs. The employer and the regulator were ordered to jointly pay £40,000 for injury to feelings. In making this top band award, the tribunal pointed to comments by the employer that Ms Meade may pose a threat to vulnerable service users, and to the restrictions it imposed on her expressing her views.  

Aggravated and exemplary damages

Very occasionally, tribunals will award damages for aggravating the harm done by behaving in a ‘high-handed’ or insulting way.  In the Meade case, the regulator and the employer were jointly liable to pay £5,000 for making insulting comments, restricting what Ms Meade could say and their hostility towards her for her beliefs.

‘Exemplary’ damages are awarded as a punishment, usually against a public sector body. The regulator had to also pay £5,000 exemplary damages for abusing its powers as a regulator by allowing its processes to be used to suppress Ms Meade’s lawful political speech.

Personal injury

Personal injury claims are usually brought in the County Court, but where the personal injury stems from discrimination, the employee can bring the claim in the tribunal. Damages can cover pain, suffering and loss of amenity, usually for psychiatric injury caused by the discrimination. The tribunal may have to determine how much is caused by the employer’s wrongdoing and how much by other factors and apportion compensation accordingly.

Although there is the potential for overlap between injury to feelings and personal injury, the individual should not be compensated twice for the same injury; known as double recovery.

Interest

Tribunals will award interest on the compensation payable, usually accruing from the date of the discriminatory act, with more complex rules for past financial losses. Interest accrues at 8%.

If the employer does not pay the compensation within 14 days of the tribunal decision, interest starts to accrue on the compensation award at 8%.

Uplifts and the Acas Code

The Acas Code of practice on disciplinary and grievance procedures allows the tribunal to increase or decrease an award by up to 25% where the employer or the employee has not complied with the Code. For instance, compensation might be increased by 25% if the dismissal was discriminatory and the employer did not follow any fair process.

For Employment Law advice, contact Neil Largan, Head of Dispute Resolution, on 01904 624185.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.