This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Comprehensive guide to mitigation of loss in employment tribunal claims in England and Wales. Explains how claimants must take reasonable steps to reduce financial losses, how tribunals assess mitigation, practical examples, and how mitigation affects compensation awards.
When an Employment Tribunal in England and Wales assesses compensation in claims such as unfair dismissal or discrimination, one important principle is mitigation of loss. Mitigation refers to the claimant's obligation to take reasonable steps to reduce the financial loss they have suffered as a result of the employer's conduct. This article explains what mitigation of loss means, the legal basis for it, how tribunals apply the principle in practice, and what practical steps a claimant should consider to support their case.
What Is Mitigation of Loss?
Mitigation of loss is a legal concept requiring a claimant to make reasonable efforts to reduce the financial impact of a wrong, such as unfair dismissal. It operates in much the same way as at common law: an award should reflect losses that could not reasonably have been avoided. If a claimant unreasonably fails to take steps to limit their loss, a tribunal may reduce the amount of compensation awarded. Importantly, mitigation does not arise automatically; the respondent (usually the employer) bears the burden of proving that the claimant has acted unreasonably in not mitigating their loss.
Legal Framework
Employment Rights Act 1996
The statutory framework for compensation in unfair dismissal and related claims is set out in section 123 of the Employment Rights Act 1996. While section 123 does not explicitly define mitigation, it requires that compensatory awards be “just and equitable in all the circumstances having regard to the loss sustained …”. The courts and tribunals interpret this in line with general mitigation principles from common law.
Common Law Principles
Under common law, a claimant must take reasonable steps to reduce their loss. In an employment context, this typically means actively seeking alternative employment or other lawful means to lessen financial loss, such as claiming applicable benefits. If the tribunal determines that the claimant has failed to take such steps without reasonable justification, it may reduce the compensatory award accordingly.
How Tribunals Apply Mitigation
Burden of Proof
The employer must demonstrate that the claimant failed to mitigate losses and that this failure was unreasonable. The claimant does not have to prove that they mitigated loss; rather it is for the respondent to supply evidence that steps were reasonably available and not taken.
Reasonable Steps
Reasonable steps can include:
- Searching for and applying to suitable alternative employment.
- Attending interviews or other employment‑related activities.
- Considering self‑employment or freelance work where appropriate.
- Claiming government benefits where entitled and where those benefits serve to offset financial loss.
Whether a given step is “reasonable” depends on the claimant's personal circumstances (such as health, skills and caring responsibilities), the availability of suitable jobs, and wider economic conditions. A tribunal weighs these factors when assessing reasonableness.
Evidence and Documentation
Claimants should compile clear evidence of their mitigation efforts. Useful documentation includes:
- Records of job applications, interviews and responses.
- Communications about self‑employment or temporary work.
- Evidence of attempts to claim benefits or engage in retraining or upskilling.
This evidence forms part of the Schedule of Loss submitted to the tribunal and supports the claimant's position on mitigation.
Practical Examples
Seeking Alternative Work
A claimant dismissed unfairly remains unemployed and actively applies for roles comparable to their previous job. If they receive interviews but no offers, a tribunal is less likely to reduce compensation for failure to mitigate.
Starting a Business
If a claimant starts their own business instead of seeking employment, the tribunal may assess whether this constituted a reasonable step to mitigate loss. Courts have held that when an employee attempts to mitigate by starting a business, tribunals must consider actual loss of earnings, the cost of mitigation (such as business costs), and earnings from the new business.
Health and Personal Circumstances
A claimant may not be able to seek work for legitimate reasons, such as health issues supported by medical evidence, or caring responsibilities. Mitigation should be assessed in light of these personal circumstances; if the tribunal finds the claimant acted reasonably given those constraints, compensation may not be reduced.
Mitigation in Different Types of Claims
The duty to mitigate loss is not limited to unfair dismissal claims. It also applies in discrimination and whistleblowing claims where financial loss arises due to dismissal or detriment. The same general principles apply: claimants should take reasonable steps to limit their losses, and failure to do so without reasonable justification may reduce compensation.
Interaction With Other Compensation Adjustments
Mitigation operates alongside other adjustments to compensation:
- Contributory fault: If the claimant contributed to the dismissal, compensation may be reduced.
- Polkey reductions: Loss may be reduced where dismissal would likely have occurred even with a fair procedure.
- ACAS Code adjustments: Compensation may increase or decrease where parties fail to follow the ACAS Code of Practice.
A tribunal may consider all these factors when calculating final compensation.
Common Questions
Is mitigation automatic?
No. A tribunal will only consider mitigation if the respondent raises it and provides evidence that the claimant failed to take reasonable steps.
Can mitigation reduce compensation to zero?
Yes, in theory. If a tribunal finds that a claimant could reasonably have avoided loss entirely (for example by securing equivalent employment promptly), it may reduce the award accordingly. However, this depends on the evidence and circumstances.
Does mitigation apply during notice periods?
Generally, mitigation applies from the effective date of termination onwards. Losses during notice periods may be treated differently depending on whether the claimant was obliged to mitigate during that time.
Practical Guidance for Claimants
- Keep detailed records of job search activity: A diary of applications, interviews and outcomes demonstrates active mitigation.
- Gather evidence of personal circumstances: Medical certificates, childcare responsibilities or other constraints help tribunals assess reasonableness.
- Include mitigation evidence in your Schedule of Loss: This strengthens your case and reduces risk of compensation reduction.
Key Takeaways
Mitigation of loss is a foundational principle in employment tribunal compensation for unfair dismissal, discrimination and related claims. It reflects the expectation that claimants take reasonable steps to limit their financial loss after dismissal or detriment. Employers must prove that claimants failed to mitigate unreasonably. Tribunals assess what actions were reasonable in the claimant's circumstances and may reduce compensation accordingly. Claimants should prepare thorough evidence of their mitigation efforts, including job applications, interviews and personal considerations, to support their claim and protect their entitlement to compensation.
