Unfair dismissal overhaul confirmed for January 2027

The UK government has confirmed that from 1 January 2027, the qualifying period an employee must serve before gaining protection from unfair dismissal will fall from two years to six months, while the statutory cap on compensatory awards — currently the lower of 52 weeks' gross pay or £123,543 — will be abolished, according to government guidance and multiple employment law firms.

The reforms form part of the Employment Rights Act 2025. They were originally proposed as a day-one right accompanied by a nine-month "light touch" process for dismissing new hires during a statutory probationary period. That approach was dropped during the Bill's passage through the House of Lords. The government instead agreed a straightforward six-month qualifying period, with no separate lighter-touch dismissal procedure retained in the final Act.

Employees who are already employed on or before 1 July 2026 will have accrued the necessary six months' service by the time the changes take effect on 1 January 2027, meaning they gain protection immediately from that date.

Once the cap is removed, tribunals will calculate compensation based on the employee's actual financial loss, bringing unfair dismissal awards into line with the uncapped approach already used for discrimination and whistleblowing claims.

Law firm Mishcon de Reya has cited government estimates that the shorter qualifying period alone could generate around 9,000 additional Acas early conciliation cases and 3,000 additional employment tribunal claims per year, making it the largest projected driver of increased tribunal caseload among the Act's reforms.

Separately, the qualifying period for an employee's right to request written reasons for dismissal will also reduce to six months, and the existing qualifying period for unfair dismissal claims relating to spent convictions will be removed entirely.

The government has said it will not hold further public consultation on the unfair dismissal changes before they come into force.