How will the 1 January 2027 unfair dismissal reforms impact exits of senior employees or highly-paid employees with complex remuneration arrangements?
At a Glance
The Employment Rights Act 2025 (ERA 2025) fundamentally reshapes the law around unfair dismissal, potentially radically changing employers’ risks. From 1 January 2027, employees will need just six months’ continuous service to acquire protection from ordinary unfair dismissal, and the compensatory award element for ordinary unfair dismissal will become uncapped. This month, we’re focusing on how this change might impact on exits of senior employees or highly-paid employees with complex remuneration arrangements. Read Part 1 of our series here.
From 1 January 2027, unfair dismissal is changing radically. The qualifying period of service required to bring an ordinary unfair dismissal claim will reduce from two years to six months (where the effective date of termination falls on or after 1 January 2027), and the current statutory cap on the compensatory award (the lower of 52 week’s pay or 123,543) will be removed.
This month, we’re focusing on what the removal of that cap on the compensatory award may mean for employers’ approach to dismissals of senior employees, especially where the individual is highly-paid or participates in complex remuneration or incentive arrangements.
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