Guide
Understanding unfair dismissal
What constitutes unfair dismissal, who can claim, and what compensation is available. Covers qualifying periods, automatically unfair reasons, time limits, ACAS early conciliation, and the tribunal claims process.
Unfair dismissal is when an employer ends someone's employment without a fair reason or without following a fair procedure. Employees who are unfairly dismissed can claim compensation at an employment tribunal.
As an employer, understanding unfair dismissal law helps you dismiss employees fairly when necessary and avoid costly tribunal claims. This guide explains who can claim, what makes a dismissal unfair, and the compensation employees can receive.
What is unfair dismissal?
A dismissal is unfair if the employer:
- Does not have a fair reason for dismissal, or
- Has a fair reason but handles the dismissal using an unfair procedure
Fair reasons for dismissal (potentially fair if handled properly):
- Capability or qualifications: The employee cannot do their job to the required standard, or lacks required qualifications
- Conduct: The employee has behaved inappropriately (misconduct)
- Redundancy: The job is no longer needed
- Statutory restriction: Continuing to employ the person would break the law (e.g., driver loses licence)
- Some other substantial reason (SOSR): A genuine business reason that justifies dismissal
Important: Having a fair reason is not enough. You must also follow a fair procedure, which typically means investigation, a meeting with the employee, a chance to appeal, and proper notice.
Qualifying period for claims
Most employees need a minimum period of continuous employment before they can claim ordinary unfair dismissal. However, there is no qualifying period for automatically unfair dismissals.
How continuous employment works
Employment is usually continuous if there's no break. Short breaks may still count as continuous if:
- There was a temporary cessation of work
- There was an arrangement or custom that the employee would be re-engaged
- The break was for illness, pregnancy, or other statutory leave
TUPE transfers: If an employee transferred to you under TUPE, their continuous service from the previous employer counts.
Automatically unfair dismissals
Some dismissals are automatically unfair regardless of the employer's reasons or how long the employee has worked. These protect fundamental rights and require no qualifying period.
Why this matters for employers
Automatically unfair dismissals:
- No qualifying period: Day-one employees can claim
- Higher compensation: Some carry uncapped compensatory awards and minimum basic awards
- Reverse burden: In some cases (e.g., pregnancy), if the employee was dismissed during a protected period, the burden shifts to the employer to prove the reason wasn't automatically unfair
Practical tip: Before dismissing any employee, check whether any automatically unfair reasons could apply. This is especially important for employees within the qualifying period, as automatically unfair dismissal may be their only route to a claim.
Compensation for unfair dismissal
If a tribunal finds a dismissal was unfair, it can order reinstatement, re-engagement, or compensation. Compensation is the most common remedy and consists of a basic award and a compensatory award.
How the basic award is calculated
The compensatory award
The compensatory award covers the employee's actual financial losses caused by the unfair dismissal:
- Immediate loss of earnings: Loss of wages from dismissal to hearing (or new job)
- Future loss of earnings: Estimated future wage loss if still unemployed
- Loss of statutory rights: Typically £500-£750 for having to rebuild qualifying period
- Loss of pension rights: Can be significant for employees with good pension schemes
- Expenses: Job search costs, retraining
Reductions to awards
Awards may be reduced for:
- Contributory fault: If the employee's conduct contributed (can reduce by up to 100%)
- Failure to mitigate: If the employee didn't take reasonable steps to find new work
- Polkey reduction: If dismissal would have happened anyway with fair procedure
- ACAS Code failure by employee: Up to 25% reduction if employee didn't follow ACAS Code
Uplift for employer failure: If the employer unreasonably failed to follow the ACAS Code on disciplinary and grievance procedures, the award can be increased by up to 25%.
Time limits for claims
Employees must act quickly to bring an unfair dismissal claim. Missing the deadline means the claim cannot proceed except in very limited circumstances.
The 3-month deadline
- Primary deadline: Claim must be submitted within 3 months less 1 day from the effective date of termination
- Example: If dismissed on 15 March, deadline is 14 June
- ACAS early conciliation: The clock stops while early conciliation is ongoing (see below)
Effective date of termination
The deadline runs from the effective date of termination (EDT), which is typically:
- With notice: The date notice expires
- Summary dismissal: The date the employee is told they're dismissed
- Fixed-term contract: The date the contract expires
- PILON: The date PILON is paid (employment ends immediately)
Late claims
Tribunals can extend the deadline only if it was not reasonably practicable to present the claim in time AND it was presented within a reasonable period after. This is a strict test rarely met unless there were exceptional circumstances.
ACAS early conciliation
Before an employee can submit an unfair dismissal claim to the tribunal, they must contact ACAS to attempt early conciliation. This is a mandatory step designed to resolve disputes without tribunal proceedings.
How early conciliation works
- Employee contacts ACAS: The employee notifies ACAS of the dispute
- ACAS offers conciliation: ACAS offers to help reach a settlement
- Up to 12 weeks: The conciliation period can last up to 12 weeks (extended from 6 weeks in December 2025)
- Certificate issued: ACAS issues a certificate with a unique reference number
- Tribunal claim possible: The employee can now submit a tribunal claim using the certificate number
Effect on time limits
The 3-month time limit stops running while early conciliation is ongoing. The employee gets at least 1 month after the certificate is issued to submit their claim (even if this is beyond the original 3-month deadline).
Settlement through ACAS
If a settlement is reached through ACAS conciliation, it's recorded in a COT3 agreement. This is legally binding and prevents the employee from bringing tribunal claims about the matters covered. Unlike settlement agreements, no independent legal advice is required.
Benefits of settling through ACAS:
- Free service for both parties
- Avoids tribunal costs and management time
- Confidential and without prejudice
- Certainty of outcome
Making a claim to the employment tribunal
The tribunal process
- Submit claim (ET1): Employee submits claim form online or by post with ACAS certificate number
- Employer response (ET3): Employer has 28 days to submit a response
- Case management: Tribunal may hold preliminary hearing to manage the case
- Disclosure: Both parties exchange relevant documents
- Witness statements: Parties prepare and exchange witness evidence
- Final hearing: The case is heard by an employment judge (and sometimes panel members)
- Judgment: The tribunal issues its decision
Typical timescales
- Response deadline: 28 days from receiving claim
- Time to hearing: Currently 6-12 months in most regions (significant backlogs exist)
- Hearing length: 1-5 days depending on complexity
- Judgment: Reserved judgments can take several weeks
Costs
Employment tribunal claims are currently free to submit (tribunal fees were abolished in 2017). Each party normally pays their own legal costs. Cost orders against the losing party are rare but possible in cases of:
- Unreasonable conduct
- Vexatious claims or defences
- Non-compliance with tribunal orders
Avoiding unfair dismissal claims
Fair procedure checklist
Following a fair procedure significantly reduces the risk of unfair dismissal findings:
- Investigate thoroughly: Gather evidence before making decisions
- Written notification: Tell the employee in writing what they're accused of or why dismissal is being considered
- Meeting: Hold a meeting where the employee can state their case
- Companion: Allow the employee to be accompanied by a colleague or trade union representative
- Consider alternatives: Could you redeploy, retrain, or give a warning instead?
- Reasonable decision: Would a reasonable employer in your position have dismissed?
- Written outcome: Confirm the decision and reasons in writing
- Right to appeal: Offer and hear any appeal fairly
Follow the ACAS Code
The ACAS Code of Practice on disciplinary and grievance procedures sets out the minimum standards. Failure to follow it can result in a 25% uplift to any compensation awarded.