The Future of Unfair Dismissal Claims Under the Employment Rights Act

The saga of the Employment Rights Bill has finally, and not without ample debate, concluded with the Employment Rights Act being passed on 16 December 2025. An early Christmas present some may say, while others are preparing for an overhaul. 

What is unanimous is that the Employment Rights Act introduces one of the most significant reforms to UK employment law in decades. These changes will reshape the landscape for unfair dismissal claims in the Employment Tribunal, with profound implications for both employers and employees.

1. Reduced Qualifying Period
   The qualifying period for ordinary unfair dismissal claims will fall from two years to six months, effective January 2027. This shift dramatically expands access to protection, requiring employers to review probationary and performance management processes with even more care.
2. Removal of Compensation Cap
   The statutory cap on unfair dismissal compensation—previously the lower of one year’s gross pay or approximately £118,000 - will be abolished. This change significantly increases financial exposure for employers, particularly in cases involving senior or highly paid employees.
3. Extended Time Limits
   The time limit for bringing unfair dismissal claims to the Employment Tribunal will extend from three months to six months from the effective date of dismissal. This provides employees with greater flexibility and opportunity, but prolongs uncertainty and risk for employers.

These reforms are expected to increase claim volumes and exacerbate existing backlogs. With over half a million open cases already recorded in 2025, the Tribunal system faces mounting pressure. Calls for investment in judicial resources and infrastructure are growing to ensure timely resolution.

Many Employment Law bodies and groups, such as the Employment Lawyers Association, are calling on the Government to address the lack of funding within the Tribunal system, that has been facing substantial delays since the pandemic. 

Probation Management - Strengthen probation reviews and documentation to mitigate risk once six-month protection applies. 

Dismissal Procedures - Ensure robust, fair processes and comprehensive record-keeping to defend claims effectively. 

Risk Assessment - Budget for potential high-value awards and consider early conciliation strategies. 

Dispute Resolution - Explore alternative dispute resolution methods to avoid costly litigation. 

The phased implementation of these reforms through 2026–27 requires proactive planning. Employers should monitor secondary legislation and guidance, update internal policies, and train managers on compliance. Failure to adapt could result in significant legal and financial consequences.

The Employment Rights Act marks a decisive shift toward stronger employee protections. Employers must act now to prepare for a future where unfair dismissal claims are easier to bring, harder to defend, and potentially far more costly.