UK Scraps £123,543 Unfair Dismissal Cap, Cuts Claim Period to 6 Months in 2027
Updated
Updated · theworkersunion.com · Jun 29
UK Scraps £123,543 Unfair Dismissal Cap, Cuts Claim Period to 6 Months in 2027
2 articles · Updated · theworkersunion.com · Jun 29
Summary
From Jan. 1, 2027, UK workers will be able to seek uncapped compensation for ordinary unfair dismissal, ending the current limit of 52 weeks’ gross pay or £123,543, whichever is lower.
The Employment Rights Act 2025 also cuts the service requirement for bringing a standard unfair dismissal claim to six months from two years, widening access to tribunals.
Tribunals will still assess losses case by case: claimants must try to mitigate losses, and judges can reduce awards for contributory conduct or where dismissal would have happened anyway.
Employers face higher legal and financial exposure—especially those with senior or highly paid staff—and are already reviewing probation, performance management, dismissal procedures and settlement strategies.
The changes are expected to reshape hiring, disciplinary processes and negotiations across the UK economy, while making ordinary unfair dismissal claims more attractive than under the capped regime.
Will stronger job protections backfire by making UK companies too risk-averse to hire new staff?
As new laws invite thousands of claims, is the UK's backlogged tribunal system headed for collapse?
Major 2027 Reforms to UK Unfair Dismissal Law: Six-Month Qualifying Period and Removal of Compensation Cap
Overview
Major changes to UK unfair dismissal law will take effect from 1 January 2027 under the Employment Rights Act 2025. The qualifying period for unfair dismissal claims will be reduced from two years to six months, and the cap on compensatory awards will be abolished. These reforms aim to reshape employment dispute dynamics by giving employees earlier protection and the potential for higher compensation. As a result, employers face new challenges, especially around managing probation periods and increased financial risk, while employees benefit from stronger rights. The government expects these changes to influence both claim behavior and workplace practices.