Journey

Dismissing an employee under new rules

Step-by-step guidance for lawfully dismissing an employee under ERA 2025 rules, including fire and rehire restrictions and 6-month qualifying period. Covers fair procedure, ACAS Code compliance, and risk assessment.

Running Updated 3 November 2026

Dismissing an employee: ERA 2025 rules

This journey guides you through the process of lawfully dismissing an employee under the Employment Rights Act 2025 rules. The new rules are more restrictive and the consequences of unfair dismissal are greater.

Time needed: 20 minutes to complete.

Is this a dismissal?

First, confirm that what you are planning is legally a dismissal:

Terminating the employment contract (with or without notice) (optional) Not renewing a fixed-term contract (optional) Forcing resignation through conduct (constructive dismissal risk) (optional) Dismissing and offering re-engagement on different terms (optional)

Guv’s take

If you ticked any of the above, this is a dismissal. Continue with this journey. If the employee is resigning voluntarily with no pressure, this is not a dismissal (but document that it was voluntary).
Check service length

The employee's length of service affects their rights.

Less than 2 years (dismissal taking effect before 1 January 2027)

No ordinary unfair dismissal claim, but automatically unfair and discrimination claims are still open

Less than 6 months (dismissal taking effect from 1 January 2027)

No ordinary unfair dismissal claim, but automatically unfair and discrimination claims are still open

6 months or more (dismissal taking effect from 1 January 2027)

Full unfair dismissal protection - must follow fair procedure

Automatically unfair grounds

No service requirement - always protected

Take note

Do not assume short service = no risk: Employees can claim automatically unfair dismissal from day one (pregnancy, whistleblowing, etc.). Discrimination claims have no service requirement. Always follow fair procedures.
Identify the reason for dismissal

You must have a fair reason for dismissal. Check which applies:

Capability - The employee cannot do the job to the required standard (optional) Conduct - The employee has behaved inappropriately (optional) Redundancy - The job is no longer needed (optional) Statutory restriction - Continuing employment would break the law (optional) Some other substantial reason - A genuine business reason (optional)

Take note

Fire and rehire check: If you are dismissing to re-engage on worse terms, this will become automatically unfair once section 28 of the Employment Rights Act 2025 is commenced (with a very narrow exception). See the fire and rehire section below.
Check for automatically unfair grounds

Some dismissals are automatically unfair regardless of the reason or procedure. Check none apply:

NOT related to pregnancy, maternity, or family leave NOT related to whistleblowing/protected disclosure NOT related to health and safety concerns raised NOT related to trade union membership or activities NOT related to asserting a statutory right NOT a fire and rehire (worse terms) NOT related to flexible working request NOT related to jury service

Take note

If any box is unchecked: STOP. You may be at risk of automatically unfair dismissal. Seek legal advice before proceeding.
Follow fair procedure

Even with a fair reason, you must follow a fair procedure. The ACAS Code of Practice sets out the minimum requirements.

For conduct or capability dismissals:

Investigation completed before any decision Employee informed in writing of allegations/concerns Meeting arranged to discuss the issues Employee given right to be accompanied Decision made after considering employee's response Alternatives to dismissal considered Decision confirmed in writing with reasons Right to appeal offered and heard fairly

For redundancy dismissals:

Genuine redundancy situation (job no longer needed) Fair selection criteria applied Consultation with affected employees Alternative employment considered Collective consultation if 20+ redundancies (optional)
Fire and rehire restrictions

Section 28 of the Employment Rights Act 2025 will make dismissing staff to re-engage them on worse terms automatically unfair once it is commenced. It is not yet in force.

This is NOT a fire and rehire situation OR: Genuine financial crisis threatening business survival (optional) AND: Changes are unavoidable and proportionate (optional) AND: ACAS Code of Practice on Dismissal and Re-engagement followed (optional)

Take note

Financial crisis exception: This is very narrow. It applies only to genuine existential threats to the business, not cost-cutting or efficiency measures. Seek legal advice if you believe this exception applies.

Fire and rehire employer guide

Detailed guidance on fire and rehire restrictions
Document everything

Maintain comprehensive records in case of tribunal claim (remember 6-month time limit from October 2026):

Investigation notes and evidence Letters and notices sent to employee Meeting notes and outcomes Decision rationale documented Appeal process and outcome (if applicable) Records retained for at least 12 months
Assess compensation risk

If the dismissal is found unfair, the potential compensation is:

Unfair dismissal compensation limits 2026/27

Unfair dismissal award limits for 2026/27 (6 April 2026 to 5 April 2027) and the removal of the compensatory award cap for dismissals taking effect from 1 January 2027.

The limits below apply to unfair dismissal claims where the relevant date falls from 6 April 2026 to 5 April 2027 (Employment Rights (Increase of Limits) Order 2026). The limit on the compensatory award stops applying for dismissals with an effective date of termination on or after 1 January 2027.

Week's pay cap (2026/27)

£751

Maximum basic award (2026/27)

£22,530 (20 years x 1.5 weeks x £751)

Minimum basic award, special cases (2026/27)

£9,157

Maximum compensatory award, effective date of termination before 1 January 2027

Lower of £123,543 and 52 weeks' pay

Compensatory award, effective date of termination on or after 1 January 2027

No cap

Uncapped before 2027

Health and safety (s.100) and whistleblowing (s.103A) dismissals

Applies from

6 April 2026 to 5 April 2027

Minimum basic award
The £9,157 minimum applies where the reason for dismissal is one of those in sections 100(1)(a) and (b), 101A(d), 102(1) or 103 of the Employment Rights Act 1996: health and safety, working time representative, occupational pension trustee and employee representative dismissals. A £5,000 minimum applies to blacklisting dismissals (s.120(1C)).

Compensatory award cap
Before 1 January 2027 the compensatory award cannot exceed the lower of £123,543 and 52 weeks' pay, except for dismissals under sections 100, 103A, 105(3) and 105(6A), which are uncapped. Section 25(3) of the Employment Rights Act 2025 omits section 124, so for an effective date of termination on or after 1 January 2027 no compensatory award is capped. The basic award and its limits are unchanged.

Employment tribunal compensation limits (opens in a new tab)

Compensatory award (dismissal taking effect from 1 January 2027)

NO CAP - based on actual losses

ACAS Code breach

Up to 25% uplift on awards

Take note

Increased risk from January 2027: Without a compensation cap, unfair dismissal claims become potentially much more expensive, especially for high earners. Ensure your procedure is robust.

Final checklist before dismissing

Fair reason identified and evidenced No automatically unfair grounds apply Fair procedure followed (ACAS Code) Alternatives to dismissal considered Not a fire and rehire (or exception applies) All documentation complete Compensation risk assessed and accepted Appeal process in place

Next steps

If all boxes are checked, proceed with dismissal following your procedure
If any boxes are unchecked, review the issue before proceeding
For complex cases, seek legal advice

Understanding unfair dismissal

Full guide to unfair dismissal law

acas.org.uk

ACAS Code of Practice on Disciplinary and Grievance (opens in a new tab)

Statutory Code for fair procedures

Dismissing an employee under new rules

Dismissing an employee: ERA 2025 rules

Is this a dismissal?

Check service length

Identify the reason for dismissal

Check for automatically unfair grounds

Follow fair procedure

For conduct or capability dismissals:

For redundancy dismissals:

Fire and rehire restrictions

Fire and rehire employer guide

Document everything

Assess compensation risk

Final checklist before dismissing

Next steps

Understanding unfair dismissal

ACAS Code of Practice on Disciplinary and Grievance (opens in a new tab)

Related journeys

Understanding the Employment Rights Act 2025

Manage your employees