From next year, employees will gain unfair dismissal rights after just six months’ service and the compensatory award cap is being scrapped entirely. Here’s our summary of the top 10 emerging and expected areas of impact, with practical steps to prepare.
At present, employees need two years’ qualifying service to claim unfair dismissal and the compensatory award is capped at 123,543 (or 52 weeks’ pay, if lower). From 1 Jan 2027, this is all going to change. Employees will gain the right not to be unfairly dismissed after just six months’ service, and there will be no ceiling on compensatory awards (the basic award will, however, stay the same).
The decision to lift the cap on compensation came as a surprise to many and has attracted much criticism, but there seems vanishingly little prospect of a U-turn. In fact, quite the opposite – the government has already issued the regulations to bring it into effect. There are no signals that a Burnham administration would have an appetite for reversal, so it’s time for employers to face up to the prospect of uncapped compensation and get as ready as possible.
The reduced qualifying period is also written into the legislation and, since it would now take a future Act of Parliament to change it, employers can expect to live with a six-month qualifying period for the foreseeable future. In fact, since the right to claim unfair dismissal will apply to all existing employees with six months’ service on 1 January 2027, it will...
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