The Department for Business and Trade (DBT) has published a summary of discussions held with employer and employee representative groups regarding the unfair dismissal reforms introduced by the Employment Rights Act 2025.
The publication coincides with the making of the Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026, which confirm that the key unfair dismissal reforms will take effect on 1 January 2027.
From that date, the qualifying period for ordinary unfair dismissal claims will reduce from two years to six months and the statutory cap on compensatory awards for unfair dismissal will be removed. The method used to calculate compensation will remain unchanged.
The stakeholder discussions considered the likely impact of the reforms, and the support employers and employees may need ahead of implementation.
Participants highlighted concerns about the removal of the compensatory award cap, particularly in relation to highly paid employees and senior executive exits. It was suggested that guidance on performance management, dismissal processes and compensation calculations in executive-level cases would be helpful.
The potential impact of the reforms on the employment tribunal system was also discussed. Participants highlighted concerns around the capacity and capability of the current system and stressed the importance of wider dispute resolution reforms and practical guidance to support...
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