Unfair Dismissal Changes: What Employers Need to Do

18th June 2026

Unfair dismissal law in Great Britain is changing in a way that will affect almost every employer and a large proportion of the workforce. Reforms introduced by the Employment Rights Act 2025, shorten the qualifying period for ordinary unfair dismissal and strengthen protection for staff.

The changes have real consequences for recruitment and dismissals from July 2026 onwards. For many organisations, especially those with limited HR capacity, this is not something to leave until later.

Where we are now: unfair dismissal in 2026

Under the current rules: (up to 31 December 2026):

• Qualifying period: Most employees need two years’ continuous service to bring an “ordinary” unfair dismissal claim.
• Fair reason and fair process: Employers must show a potentially fair reason (conduct, capability, redundancy, illegality or “some other substantial reason”) and follow a fair procedure.
• Compensation cap: The compensatory award is capped (currently the lower of a statutory maximum or 52 weeks’ gross pay).
• Day‑one protections: There is already no qualifying period for certain claims, such as discrimination and automatically unfair dismissal (e.g. whistleblowing, health and safety).

What changes on 1 January 2027?

Three major reforms will apply across Scotland, England and Wales:

1. A Much Shorter Qualifying Period

The qualifying period for unfair dismissal reduces from 2 years → 6 months

This means:

• Staff will gain protection much earlier
• The “low‑risk” period for employers becomes significantly shorter

Employees with 6 months’ service by 1 January 2027 will gain protection immediately.

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2. Earlier Right to Written Reasons for Dismissal

The right to request written reasons will also reduce to: 6 months’ service (down from 2 years)

This aligns with the new unfair dismissal threshold.

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3. Removal of Compensation Cap

The statutory limit on compensation will be removed. This means increased financial risk, particularly for larger or more complex roles

There will be no upper limit on compensatory awards

Why July 2026 is a key date

Although the law changes in January 2027, the practical impact starts earlier. For example:

• An employee who starts on 2 July 2026 will have completed six months’ service by 1 January 2027. Under the new rules, they will have unfair dismissal protection from that date.
• Employees who started earlier in 2026 will also gain protection earlier than they would have previously. So, someone who started in April 2026 will have protection from January 2027.

What this means for you

From summer 2026, you should assume:

• New starters will gain protection much sooner
• Early-stage decisions carry greater legal risk

This is particularly important for charities and community organisations where:

• Roles evolve quickly
• Processes may be informal
• HR capacity is limited

What employers should be doing now

1. Review contracts, handbooks and policies

• Update references to qualifying periods for unfair dismissal and written reasons for dismissal to reflect the six‑month threshold from 1 January 2027.
• Ensure disciplinary, capability and redundancy procedures are robust and consistently applied, bearing in mind the increased risk for employers.

2. Strengthen probation and early performance management

• Introduce earlier check-ins and reviews
• Address concerns quickly and clearly
• Avoid leaving issues unresolved until the end of probation

A “light touch” approach will become much riskier.

3. Factor in increased financial risk

With no statutory cap on compensatory awards:

• Poor decisions could have significant cost implications
• Settlement approaches may need to change
• Documentation and fairness become even more critical

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A Note for Stretched Organisations

For many voluntary sector organisations:

• HR is not a dedicated function
• Managers are balancing multiple responsibilities
• Processes have developed organically over time

These changes increase the risk of informal decision-making, delayed action and inconsistent processes. All of which can lead to costly disputes under the new framework.

Download and share our Bitesize Guide to Unfair Dismissal:

You can also call us on 0141 354 6515 or email peopleservices@gcvs.org.uk

This content was written by our team, with AI tools used only to support review and refinement.