The government has announced that the maximum compensation award for unfair dismissal is to increase by 5.1% in February next year.

According to employment lawyer EMW Picton Howell, the recession will mean that the number of compensation pay outs will inevitably increase.

Jon Taylor, head of employment at EMW Picton Howell, says: “A four-fold increase in the last 10 years is quite a dramatic rise and the credit crunch looks set to really compound the problem for employers.

“If employers are laying-off more staff they are going to face more unfair dismissal claims, add to that an increase in long-term unemployment rates and you have a triple whammy.”