As we explain in our previous article, the UK government plans to remove the current ceiling for unfair dismissal awards in Great Britain (the lower of one year’s gross pay or £118,223). In this article, we look in more detail at where this would leave us internationally.

Caps are the global norm - even in traditionally employee-friendly jurisdictions in Europe

Most major economies impose structured limits to balance fairness with predictability. For example, France introduced the Macron scale in 2017, which caps damages based on an employee’s length of service with their employer. The cap is around three and a half months’ salary for at least two years’ service, rising to a maximum of 20 months' salary for employees with 29 years service and above. Spain applies a formula awarding 33 days’ salary per year of service (for employees employed after February 2012), capped at 24 months.

Italy operates a dual system; employees hired after March 2015 face capped compensation of six to 36 months’ salary for large employers and three to 18 months for small employers. A recent Constitutional Court ruling declared the previous rigid cap of three to six months for small employers unconstitutional, granting judges discretion to award between three and eighteen months’ salary, ensuring proportionality. Employees hired before 2015 enjoy stronger reinstatement rights but compensation will still be capped within defined monetary bands.

Ireland caps compensation at 104 weeks’ total remuneration and Sweden caps awards at 32 months’ salary, depending on length of service. Switzerland caps compensation at six months’ salary, whilst Denmark’s compensation cap, in addition to notice pay, is up to 52 weeks’ pay under collective agreements and up to six months’ pay for salaried employees depending on length of service.

Beyond Europe - economic powerhouses and global comparators

Outside Europe, caps are also common. For example, in Australia, the Fair Work Commission can order compensation for unfair dismissal claims of up to a maximum of six months’ salary.

Where are caps missing? Rare exceptions to the rule

Uncapped compensation is rare globally, with most systems applying structured limits. Some of the exceptions include Luxembourg, which does not have a fixed cap on compensation for unfair dismissal decided by the court.

Canada also lacks a statutory cap, but compensation for wrongful dismissal is based on damages calculated according to the reasonable notice period that the employee would have been entitled to if properly notified.

The United States generally operates under an ‘at-will’ employment model, meaning there is no statutory unfair dismissal regime. However, employees can bring wrongful termination claims in certain circumstances, which may lead to substantial awards, including punitive damages.

India does not have a statutory cap on unfair dismissal compensation under the Industrial Disputes Act. Tribunals usually order reinstatement with possible back pay or, in some cases, a fact-specific lump sum. Where termination is lawful for reasons other than misconduct, employers must pay severance of at least 15 days’ average pay per completed year of service; this is a minimum requirement, not a cap.

Brazil also lacks a formal statutory cap with severance being dictated by legal and contractual standards. If an employee is entitled to statutory protection against dismissal, courts typically restrict damages to lost wages and moral damages. If courts do not award reinstatement, damages will be similar to statutory severance obligations such as a 40% penalty on the employee’s FGTS fund (a mandatory savings account system designed to protect employees in case of dismissal without cause).

Is Great Britain heading towards becoming a global outlier?

Overall, the examples discussed in this article show that most major economies prefer some sort of compensation cap or structured limit to maintain predictability for employers while offering fairness to employees. If the UK moves toward an uncapped system, most other countries, including France, Ireland, Italy, Spain, Switzerland and Australia, would still apply clear, structured limits.

Understanding these differences matters not only for multinational companies managing cross-border risks but also for UK employers who want to benchmark against global norms and anticipate how this shift could affect competitiveness and employee relations.

Note that these proposed changes relate to Great Britain only.  Employment legislation is devolved in Northern Ireland and it remains to be seen if a change in Great Britain would also be adopted in Northern Ireland.