Initially, it was proposed that protection against unfair dismissal would be a day one right. However, this was met with resistance in the House of Lords; and our survey was referenced to support their reservations during debates.

Following a period of ping pong, it was decided that the qualifying period to make an unfair dismissal claim would reduce to six months’ service instead of two years, and this come into effect on January 1 2027.

Around six million people will gain unfair dismissal protection, and because of the retrospective application of the law, employees starting a role on July 1 2026 will be the first to benefit from waiting six months to be protected.

What is unfair dismissal?

Unfair dismissal is when an employee’s contract is terminated without a fair reason or without adhering to a fair procedure. Employers must demonstrate the following elements to avoid unfair dismissal claims:

A fair reason for dismissal

There are five potentially fair reasons for dismissal:

1. Capability: The employee couldn’t fulfil work duties because of poor performance , illness, or didn’t have the necessary qualifications.

2. Conduct: Behaviour or actions of the employee that break the employer’s rules.

3. Redundancy : Circumstances mean the role is no longer required.

4. Statutory illegality: Instances where continuing employment breaches the law.

5. Some Other Substantial Reason (SOSR): A category for other legitimate business reasons.

Reasonable treatment

An employer must act reasonably in the circumstances and ensure that dismissing the employee was a reasonable response to what happened.

Fair procedure

A comprehensive and fair dismissal process must be followed before employment is terminated.

How much compensation for unfair dismissal?

Presently, following a successful claim, unfair dismissal compensation yields a maximum award of 52 weeks’ pay or £123,543.

However, the unfair dismissal cap is set to be removed on 1 January 2027. That means unfair dismissal payments will be unlimited.

Download your free unfair dismissal changes guidance

Our experts have developed these notes covering unfair dismissal changes to ensure your business is prepared and protected.

Beyond unfair dismissal changes, Peninsula provides exceptional HR support for businesses throughout the UK. Partnering with us unlocks:

• Access to 24/7 guidance

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