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Unfair dismissal: employer guide

How unfair dismissal protection works for employers: the 6-month qualifying period, fire and rehire restrictions, removal of the compensation cap, and extended tribunal time limits. Includes compliance checklist and practical guidance.

Guide summary

Prepare for upcoming changes to unfair dismissal rules. From 2026 onwards, the qualifying period for employees to claim unfair dismissal will drop from 2 years to 6 months. Fire and rehire will become automatically unfair from January 2027, except in genuine financial emergencies. Keep dismissal records for at least 12 months and follow the ACAS Code to avoid penalties.

  • Qualifying period will reduce to 6 months once section 25 is commenced
  • Fire and rehire is automatically unfair from 1 January 2027
  • Fire and replace (replacing employee with contractor) is also unfair
  • Exception: genuine financial difficulties threatening business viability
  • Compensatory award cap removal is not yet in force
  • Tribunal time limit will extend from 3 months to 6 months
  • Keep dismissal records for at least 12 months
  • Follow the ACAS Code on dismissal and re-engagement
  • Plan probation periods to match the 6-month qualifying period
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Understanding unfair dismissal

What constitutes unfair dismissal, who can claim, and what compensation is available. Covers qualifying periods, automatically unfair reasons, …

Unfair dismissal law gives employees significant protections against being dismissed without a fair reason and fair procedure. This guide explains how the rules work, the qualifying period, compensation, and what employers must do to comply.

Status: The Employment Rights Act 2025 changes described below are not yet in force. The current ordinary unfair-dismissal qualifying period remains 2 years and the statutory compensatory-award cap still applies. Section 25 will reduce the period to 6 months and remove the cap once commenced.

Planned qualifying-period change

The Employment Rights Act 2025 will reduce the unfair dismissal qualifying period to 6 months once section 25 is commenced:

Qualifying period
Currently 2 years; planned 6 months subject to commencement
Fire and rehire
New automatic-unfairness provisions not yet in force
Tribunal time limit
Currently 3 months less 1 day; planned 6 months subject to commencement
Compensatory award
Statutory cap currently applies; planned removal subject to commencement

How the qualifying period works

The key features of unfair dismissal protection:

What this means in practice

  • Planned protection from 6 months: This will apply only after section 25 is commenced; the current ordinary qualifying period remains 2 years
  • Day-one for some: Redundancy claims remain a day-one right
  • Automatically unfair: No qualifying period for automatically unfair dismissals (unchanged)
  • Initial period: A new 'initial period of employment' concept is planned for the first 6 months once the provision is commenced

Impact on probation

Employers should align probation periods with the qualifying period:

  • You can operate a 6-month probation period
  • Dismissal during probation must still follow fair procedures
  • Prepare for employees to gain ordinary unfair dismissal protection after 6 months once the change is commenced
  • Consider front-loading performance management to assess suitability quickly

Planned compensation change

The current statutory cap remains in place. Section 25 will remove it once commenced:

Compensatory award
Current statutory cap remains; removal not yet in force
Already uncapped
Health and safety dismissals, whistleblowing dismissals
Basic award
Remains calculated using the statutory week's pay cap

Prepare for increased risk: If the cap is removed on commencement, unfair dismissal claims could become more expensive, especially for high earners. Ensure dismissal procedures are fair and well-documented.

Fire and rehire restrictions

Planned extension of tribunal time limits

The current limit for most claims remains 3 months less 1 day. Section 152 will extend relevant limits to 6 months once commenced:

Time limit
Currently 3 months less 1 day; planned 6 months subject to commencement
Early conciliation
Extended to up to 12 weeks
Total potential timeframe
Up to 9-10 months from incident to claim
Record retention
Maintain dismissal records for at least 12 months

Employer compliance checklist

Dismissal procedures

  • Review any planned restructuring or terms changes against the current ACAS Code and prepare for the new fire-and-rehire restrictions
  • Familiarise with ACAS Code of Practice on Dismissal and Re-engagement
  • Prepare document retention policies for the planned 6-month tribunal window
  • Review harassment policies for third-party harassment liability

Performance management

  • Review dismissal and performance management procedures
  • Prepare probation policies for the planned reduction from the current 2-year qualifying period
  • Train managers ahead of the planned 6-month qualifying period
  • Consider the future impact if the compensatory-award cap is removed
  • Review employment contracts and handbooks

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