Potential implementation: January 2027

What is the position now?

At the moment, most employees must work for an employer for two years before they can bring an unfair dismissal claim. There are some exceptions. If a claim succeeds, compensation is limited to the lower of one years’ salary or £118,223.

What is changing?

The government plans to reduce the qualifying period for unfair dismissal to six months. This means employees will gain legal protection much earlier in their employment. In addition, the cap on compensation is to be removed, meaning that awards can be unlimited.

What does this mean for employers?

Employers will face a higher risk of unfair dismissal claims, particularly from senior or higher-paid staff, as more employees are likely to make claims. Claims may also become more complex where health issues or age are involved.

Settlement agreement negotiations are also likely to become more challenging, especially with senior employees on higher salaries.

As at Feb 26