In early December 2025, the UK government announced two key changes to the unfair dismissal regime: 1) that the period of qualifying service necessary to bring a claim will reduce to six months, and 2) that the cap on compensation for such claims will be lifted.
Summary of Unfair Dismissal Law
UK employees with at least two years’ service have a right not to be unfairly dismissed. For employers, this means that to lawfully terminate an employee, the employer must be able to identify a fair reason for the dismissal (which may be, for example, redundancy, conduct, or capability) and show that it has followed a fair process.
In some circumstances, the lawful process may be completed relatively quickly, for example, where the employee is believed to have committed an act of gross misconduct, such as fraud or serious insubordination (although even in these cases, it is necessary to complete certain formalities before effecting the dismissal). In other cases, however, completing a lawful dismissal process might take several months, meaning that employers sometimes opt to offer the employee an exit on mutually agreed terms as a way of expediting matters.
The Reforms
Reform of the UK unfair dismissal regime has been on the cards since before the general election in 2024, when, whilst in opposition, the Labour Party proposed a variety of employment law reforms, including proposals to make protection against unfair dismissal a “day one” right and remove existing caps on associated...
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