From 1 January 2027, the qualifying period for unfair dismissal claims reduces from two years to six months under the Employment Rights Act 2025, and the cap on compensatory awards is removed. The cap currently stands at GBP 123,543 or 52 weeks' gross pay, whichever is lower; the basic award remains capped.
The change applies to dismissals on or after that date, and approximately 6.3 million employees will gain protection. The statutory probationary period included in the original Bill was not carried into the final Act, so probation remains a contractual matter. Restrictions on dismissal and re-engagement, known as fire and rehire, take effect on the same date, having been moved from October 2026. Employers should review performance management and dismissal documentation.