Category: Employment Law
Unfair Dismissal Rights Are Changing: Is Your Business Ready?
The landscape of employment law is changing, and employers need to be prepared. Unfair dismissal law is an important part of the employment relationship, providing employees with protection against being dismissed without a fair reason or without following a fair process.
The rules governing unfair dismissal are set to change significantly, bringing greater protection for employees and new considerations for employers. Understanding what is changing – and preparing for those changes in advance – can help employers reduce the risk of disputes and ensure that employment decisions are handled fairly, consistently and minimise the risk of a costly employment tribunal. The changes covered below, along with actions employers need to take, are:
- Reduction to the length of service required to bring a tribunal claim
- Removal of limits to compensatory awards
- Changes to the right to receive written reasons for dismissal
- Increase to the time for employees to bring a tribunal claim
What is changing?
The window is getting shorter… From two years to six months
The current qualifying period for employees is two years’ continuous service before they can bring an ‘ordinary’ unfair dismissal claim, that is a claim for a potentially fair reason such as their conduct. Significant changes to unfair dismissal rights are due to come into force on 1 January 2027 under the Employment Rights Act 2025 wherein the qualifying period will be reduced to six months.
At six months, the employee gains additional employment rights such as protection against the ordinary unfair dismissal and makes it easier for employees to bring an unfair dismissal employment tribunal claim.
Compensatory award cap
Currently, compensation for unfair dismissal is subject to a statutory cap of the lower of 52 weeks’ gross pay or £118,223. The Employment Rights Act 2025 removes this cap from 1 January 2027. However, the underlying basis on which employment tribunals calculate compensatory awards will not change.
This means that a successful claimant will no longer be restricted by the existing statutory ceiling, although the amount awarded will still depend on the circumstances of the individual case and the tribunal’s assessment.
Removing the cap does not mean every successful claimant will receive a higher award. The tribunal will continue to calculate compensation based on the claimant’s actual and projected financial losses, supported by evidence. Most of the unfair dismissal awards are currently well below the existing cap.
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Written reasons for dismissal
Currently, an employee generally needs two years’ continuous service before they can request a written statement setting out the reasons for their dismissal.
From 1 January 2027, this qualifying period will be reduced to six months. This brings the right to written reasons into line with the new six-month qualifying period for ordinary unfair dismissal claims.
Employees who have already completed six months’ service by that date will gain protection immediately and those employed after July 2026 will generally reach the new qualifying period six months after starting employment.
Employees have day-one protection against dismissal for unfair reasons including whistleblowing, trade union rights and discrimination. Discrimination and automatically unfair reasons remain a high risk and are protected under the Equality Act 2010. It remains subjective to its existing rules and does not depend on completing two years’ service.
The reforms do not turn unfair dismissal into a day-one right for every employee. The ordinary protection will remain subject to the six-month qualifying period.
Dismissal still needs judgement and documentation, which will include making timely decisions and recording the evidence.
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What Does the Tribunal Statistics Historical Data Shows?
The Employment Tribunal system has experienced significant fluctuations. For example, employment tribunal claims increased from 16,935 in 2015/16 to almost doubled to 36,171 in 2024/25. (Tribunals – Courts data – Justice Data)
The removal of Employment Tribunal fees in 2017 was followed by a substantial increase in tribunal claims, however not all the claims are related specifically to unfair dismissal. The Government latest economic analysis estimates that the change could result in approximately 3,000 additional Employment Tribunal cases claims.
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What does this mean for employees?
Employees will have greater access to ordinary unfair dismissal protection once they have completed six months’ service. This change provides an earlier access to ordinary unfair dismissal protection through the employment tribunal system.
This also provides an additional legal safeguard for people who might previously have been unable to bring an ordinary unfair dismissal claim because they had not completed two years’ employment.
Employees considering a claim should be aware that strict tribunal time limits apply. In most cases, an employee must notify Acas, the Advisory, Conciliation and Arbitration Service, before bringing an employment tribunal claim.
Historically, the employee must normally notify Acas within 3 months minus 1 day from the effective date of termination before bringing a tribunal claim. However, with effect from 1 October 2026, the time limit for most Employment Tribunal claims will increase from 3 months minus 1 day to 6 months minus 1 day.
This means that for an unfair dismissal where the effective date of termination is on or after 1 October 2026, the employee will generally have six months, rather than three, to start the tribunal process.
What can you do – As an employer?
The reduction from two years to six months represents a substantial change in employment law. Employers should review their recruitment, probation periods, performance management, disciplinary procedures and dismissals, and the existing policies and practices, ensure that the managers understand their responsibilities and keep a check who reaches six months by 1 January.
Employers using six-month or longer probationary periods should ensure that probation arrangements operate consistently with the new qualifying period. Clear performance expectations, regular reviews and properly documented decisions will become increasingly important.
Employers should also ensure managers understand that the shorter qualifying period does not remove the need for a fair and appropriate process when dismissing an employee.
The changes also do not mean that employers will lose the ability to dismiss employees. Employers can still dismiss for legitimate reasons, such as capability, conduct, redundancy or another substantial reason, provided the dismissal is fair and lawful. Employers should continue to follow an appropriate fair procedure and maintain evidence supporting their decisions.
With millions more employees potentially eligible to bring an unfair dismissal claim, ensuring that clear performance expectations with regular reviews, disciplinary and dismissal procedures are properly documented and consistently followed will become increasingly important.
Employers need to pay closer attention to how they manage employees from the early stages of employment and it is much more important to have a robust recruitment, performance management and dismissal procedures.
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