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Dismissal Compensation

Last updated 23rd Sep 2022


The term dismissal compensation refers to a sum of money received by individuals that are wrongfully terminated. When an employee is illegally dismissed from their job, they can file a claim against their former employer in a court of law, and receive a monetary award and / or allowed to return to their job.


If an employee can prove they were wrongfully terminated, or illegally terminated, they may be able to collect what is known as dismissal compensation from their former employer. Wrongful termination can occur when an employee loses their job in a manner that breaches their employment contract, or an employment law.

Terms by which individuals are employed are typically outlined in an employee handbook. Wrongful termination can also occur when an employee is fired for being a whistleblower, or refusing to perform an unsafe or illegal act. Finally, companies must also abide by their own termination processes, or an employee may have a claim against their former employer.

A dismissal compensation benefit may be specified in the company's employee handbook. Generally, companies offers of compensation range from a low of one-half weeks to a high of two weeks of pay for each year of service. Companies will oftentimes have a cap on this benefit. For example, the maximum benefit may be capped at 52 weeks of pay. In addition to monetary compensation, the employee may be eligible to receive benefits such as medical coverage. A court of law may also award punitive damages in addition to ordering dismissal compensation.

Employees can also be reinstated as a result of wrongful termination, which means they are allowed to return to their job with no loss of employment continuity.

Related Terms

total compensation, incentive compensation, dislocated worker, exit incentives, severance pay, workforce reduction, verifying compensation

Moneyzine Editor

Moneyzine Editor