Unfair Dismissal Reform:What do we now know will change!

Unfair Dismissal Reform

Unfair Dismissal Reform:
What do we now know will change!

The UK government’s Employment Rights Bill introduces sweeping changes to unfair dismissal protections, representing one of the most significant employment law reforms in decades. These changes aim to strengthen job security for workers, while creating new compliance challenges for businesses.

In the last week, the focus has very much been on unfair dismissal. First we had clarity after push back from the House of Lords that unfair dismissal will not indeed be a day one right, as was pledged by the Government in their manifesto. Rather employees will need a qualifying period of six months service before they can claim unfair dismissal. Currently, employees need two years of continuous service before they can claim unfair dismissal. Under the new rules, this qualifying period will once again be at its lowest term of six months and at its highest has been two years.

“Over the last 50 years there has always been a qualifying period of some sort for employees, so a reduction to six months service as opposed to a day one right is a small win for employers, compared to what could have been”

Ami Naru, Head of Employment

Under the reduced qualifying period employees will gain protection much earlier, reducing the window for employers to dismiss without risk of a tribunal claim. Employers must ensure they review their recruitment and probation processes to mitigate such risk.
The change in the qualifying period for unfair dismissal of course will have no impact on workers who will continue to have immediate protection against discrimination and automatically unfair dismissal (e.g., whistleblowing, health and safety concerns), for which there is no qualifying period.

The second major change relating to unfair dismissal is the removal of the statutory cap on unfair dismissal compensation. Currently, successful employees could be awarded the lower of 52 weeks’ pay or £118,223— this cap will be abolished and moving forwarded compensation is unlimited (much like it is in discrimination and whistleblowing claims). Whilst many employees will not be impacted by the removal of the cap, the risk for employers is with any high earners and senior executives who could pursue claims worth millions, increasing litigation exposure for employers.

In terms of implementation employers have roughly 18 months to prepare for these changes. It is likely that six-month qualifying period will apply to new starters from July 2026 and full protection in force for all employees by January 2027.

“These reforms represent a fundamental shift in the employment landscape. Reducing the qualifying period to six months and removing the compensation cap will significantly increase the risk profile for employers and the number of tribunal claims. Businesses must act now to review their policies, strengthen probation management, and ensure fair processes are in place. Failure to prepare could result in costly tribunal claims and reputational damage.”

Ami Naru, Head of Employment

There is no doubt, that given protection being afforded to many more employees, coupled with the removal of the compensation limit, the number of Employment Tribunal claims will rise. The Tribunal system is already under severe strain and with the increased number of claims, it is likely that many cases will not be heard for years after the incidents complained of.

Practical steps to take now:

Review Contracts & Policies: Update dismissal procedures and probation clauses.
Train Managers: Ensure fair and documented processes for performance issues.
Budget for Risk: Consider insurance or contingency planning for tribunal claims.
Seek Legal Advice: Especially for senior-level terminations.

We can help you navigate through this significant change in employment law and can offer Employment Tribunal Insurance, please do get in touch.

ami@travlaw.co.uk

or call;

0113 258 0033

This article was originally published on: 8 December 2025