Employment Rights Act 2025: unfair dismissal changes from January 2027

Posted on: 06/07/2026

Category: For you, For your business

Estimated reading time: 3 minutes

From January 2027, further changes in relation to unfair dismissal of employees will be coming into force under the Employment Rights Act 2025.

What is changing?

Currently, an employee may only claim “ordinary” unfair dismissal if they have two years of continuous service. This does not affect rights that accrue from the first day of employment, such as claims related to a protected characteristic (e.g. race, sex etc.,) or whistleblowing.

This changes on 1 January 2027 so that employees with six months of continuous service with an employer can claim unfair dismissal.

Who will this apply to and when?

Importantly, service from 1 July 2026 may count towards the new six months’ qualifying period.

For example, an employee who starts employment on 1 July 2026 will be able to claim unfair dismissal from 1 January 2027 if they are unfairly dismissed on or after that date.

What is changing about compensation?

Another important change on 1 January 2027 is that the current statutory cap on compensation for unfair dismissal will disappear.

At the moment, an employee’s compensatory award can be limited to either:

• one year’s loss; or
• a capped sum, currently £123,543.

If the cap is removed, compensation may instead be based on the employee’s actual losses, subject to the usual rules about reducing those losses where possible.

The statutory cap in respect of the calculation of a week’s pay for a basic award still remains.

So, what does this mean?

This may result in:

• more employees becoming eligible to bring unfair dismissal claims; and
• more claims in an already busy employment tribunal system; and
• more work for Acas in the early conciliation process required before a claim can be started in the tribunal.

Employers should remember that probation periods are not the same as the six months’ qualifying period. Performance during the first six months should be monitored carefully, with clear feedback, support and records where concerns arise.