Changes to the Law on Unfair Dismissal under the Employment Rights Act 2025

In circumstances where an employee is successful in their claim for ‘ordinary’ unfair dismissal against their employer, the Employment Tribunal can make a compensatory award that is currently capped (as of 6 April 2026), at the lower amount of either £123,543 or 52 weeks’ gross pay.

Changes that will be made by the ERA

Qualifying Periods

Despite the Government’s initial proposal to introduce protection from unfair dismissal as a day-one right, the ERA will instead reduce the qualifying period for protection against unfair dismissal from two years to six months. It is therefore intended under the new legislation that employees who have worked for their employer for a continuous period of six months or more as of 1 January 2027 will have unfair dismissal protections (this will apply to employees commencing employment from 1 July 2026 onwards). Other employees will therefore gain such protections once they have reached the required six-month qualifying period. 

Compensatory Cap

The ERA will also repeal the existing legislation that imposes the current cap on compensatory awards for unfair dismissal claims. The existing numerical cap and the cap of 52 weeks’ gross pay will therefore be removed. These changes will apply where the effective date of termination falls on or after 1 January 2027. Whilst this is unlikely to have a significant impact in most cases, higher-paid employees and those who experience reduced re-employment prospects will likely benefit from this.

Laura Wharton, Partner, JMW Solicitors LLP