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HMRC internal manual

National Insurance Manual

NIM07020 - Class 1 NICs: Payments made under employment legislation: Unfair dismissal: Pay arrears under a reinstatement order: General

Sections 111-116 Employment Rights Act 1996

If an employee believes they have been dismissed unfairly by their employer, they cancomplain to an employment tribunal (“ET”) (in Northern Ireland, an industrialtribunal). If the ET upholds the complaint, it may order the employer to re-instate theemployee:

  • if this is what the employee wants; and
  • if the ET considers it practicable for the employer to reinstate the employee.

The effect of a reinstatement order is that the employer is required to treat theemployee in all respects as if they had not been dismissed. This means that the employeecannot be reinstated on terms that are less favourable than those the employee enjoyedbefore they were dismissed.

As part of a reinstatement order an ET must also specify the amount, if any, that theemployer must pay the employee. For instance, this might include arrears of pay from thedate of dismissal to the date of reinstatement.

In calculating any amount that the employer must pay the employee, the ET must take intoaccount certain payments received by the employee between:

  • the date on which they were dismissed; and :
  • the date on which they were reinstated.

The payments that the ET must take into account are:

  • wages in lieu of notice or ex gratia sums;
  • remuneration paid in respect of employment by another employer;
  • such other benefits as the ET thinks appropriate.

For details of the NICs treatment of payments made under a reinstatement order, see NIM07021.