UK Unfair Dismissal Overhaul Triggers Litigation Warning as £123,543 Compensation Cap Ends
Updated
Updated · travelweekly.co.uk · May 26
UK Unfair Dismissal Overhaul Triggers Litigation Warning as £123,543 Compensation Cap Ends
3 articles · Updated · travelweekly.co.uk · May 26
July 1 marks the point when broader unfair dismissal rights start applying to new hires, and employment lawyer Rebecca Thornley-Gibson said the uncapped payouts will spur many more claims.
January 1 cuts the qualifying period for most unfair dismissal claims to six months from two years, while ministers dropped plans for a day-one right and scrapped a statutory probation period.
October doubles the deadline for bringing unfair dismissal claims to six months from three, and also starts a tougher duty on employers to take all reasonable steps to prevent sexual harassment.
Employers are already building in five-month probation buffers, Thornley-Gibson said, and she expects a wave of dismissals in November and December before the new regime fully bites.
Tribunal claims have already risen sharply, she said, with AI helping generate filings, suggesting the Employment Rights Act 2025 could intensify pressure across most businesses.
With UK unfair dismissal payouts now uncapped, are businesses facing a new era of multi-million-pound claims?
As AI fuels a surge in claims, is the UK's tribunal system prepared for the coming litigation storm?
UK Unfair Dismissal Overhaul: ERA 2025 Brings Uncapped Compensation and Six-Month Qualifying Period from January 2027
Overview
The UK is set for a major shift in employment law with the Employment Rights Act 2025, which received Royal Assent and will take effect on January 1, 2027. The government has confirmed there will be no further consultation, solidifying two key reforms: the complete removal of the compensation cap for most unfair dismissal cases and a reduction in the qualifying period for bringing such claims. These changes mark a significant transformation for both employees and employers, increasing potential compensation for dismissed workers and raising the stakes for businesses across the country.