What are the penalties for a breach of employment contract? | Barrister Connect

When an employer fails to honour the terms of your employment contract, it can lead to a whole world of financial stress, emotional disruption, and uncertainty about your next steps.  

A breach of your employment contract could cover anything from unpaid wages or benefits to wrongful dismissal, leaving you questioning your rights as an employee – as well as your options for recourse. This article will explore the potential penalties, compensation, and steps you can take if your employer has breached your employment contract under UK law.  

What is a breach of employment contract?  

A breach of an employment contract occurs when either you or your employer fails to comply with the terms of the contract. Since we’re focusing on employer breaches, this could look like: 

• Non-payment of wages or bonuses  

• Unlawful deduction of wages  

• Failure to honour agreed benefits (such as sick pay, holiday entitlement, or pensions)  

• Unreasonable alterations to your contract (e.g., salary reductions without consent)  

• Wrongful dismissal for reasons inconsistent with your employment terms  

A breach can be classed as fundamental (significant breaches that challenge the entirety of the agreement, like wrongful dismissal) or minor (less severe breaches that may not wholly invalidate your contract).  

Can I take legal action due to a breach of contract? 

If you believe your employer has breached your contract, you absolutely have the option to pursue legal remedies. Cases involving breaches can either be resolved directly with your employer or, if necessary, escalated to an Employment Tribunal or Court.  

Employment Tribunal vs Civil Court  

• Employment Tribunal  

Many breach of contract cases are taken to Employment Tribunals, particularly if they arise directly out of statutory rights (e.g., unfair dismissal claims). Tribunals handle claims up to a limitation of £25,000 in compensation.  

• Civil Court  

If your claim surpasses the £25,000 limit or if the breach doesn’t fall within the Tribunal's remit, the case can escalate to a Small Claims Court or a higher civil court. Civil courts often provide a broader scope for awarding damages.  

Potential Penalties and Compensation for a Breach of Contract  

The penalties your employer may face largely depend on the severity of the breach and the circumstances surrounding it, but could include: 

Compensation for Financial Loss  

The most common outcome of a successful breach of contract claim is compensation that seeks to restore the financial loss you have incurred as a result of the breach. Examples include the recovery of unpaid wages, benefits, commissions, or bonuses.  

• Unpaid Salary: If your employer has failed to pay your contracted salary, they will likely be ordered to pay the full amount owed.  

• Bonuses or Commission: If bonuses or commissions were contractually guaranteed but withheld, these can also be claimed.  

Damages for Wrongful Dismissal  

If the breach of contract concerns wrongful dismissal, compensation would aim to cover what you would have earned during the “notice period” set out in your contract. This includes base salary, benefits, and any other entitlements such as holiday pay.  

For example, if your notice period was three months and your monthly salary is £3,500, you could claim up to £10,500 plus any unpaid benefits or commissions owed over the same period.  

Loss of Career Benefits  

If the breach relates to missed career development benefits (e.g., denial of training opportunities or pension contributions), you may be entitled to damages reflecting the value of what was lost.  

Aggravated Damages  

While not quite as common, courts or tribunals may award aggravated damages if it is proven that the employer acted in a malicious or oppressive manner, showing disregard for the employee’s well-being (e.g., bullying or harassment alongside the breach).  

Interest or Legal Costs  

Compensation may also include interest on unpaid amounts and contribution towards reasonable legal costs, particularly if resolved through the court system. Employment Tribunals are typically more conservative regarding cost recovery.  

Does pursuing a breach of contract claim cost money?  

Employment Tribunal claims do not typically carry fees for filing. However, legal costs should be factored in, especially for cases requiring barrister representation.  

If fees are a concern, it’s worth noting that the direct access scheme allows members of the public to instruct a barrister directly, without the additional cost of hiring a solicitor. Services such as Barrister Connect offer a wide range of employment law practitioners, who can help in breach of contract claims and all other types of employment law matter.