UK Employment Rights Act Cuts Unfair Dismissal Threshold to 6 Months, Removes Compensation Caps
Updated
Updated · Lewis Silkin · Jul 3
UK Employment Rights Act Cuts Unfair Dismissal Threshold to 6 Months, Removes Compensation Caps
3 articles · Updated · Lewis Silkin · Jul 3
Summary
From 1 January 2027, employees with 6 months’ service will be able to bring unfair dismissal claims, and tribunals will no longer face a cap on compensation.
Fixed-term contracts are set to become a major risk point because non-renewal counts as a dismissal, pulling many contracts of 6 months or more into the new regime.
Employers will need a fair reason and process before letting those contracts expire, typically relying on redundancy or some other substantial reason and considering alternative roles.
Maternity-cover and other temporary replacement contracts will face closer scrutiny because written terms, consultation and vacancy checks may still be needed to defend a dismissal.
The changes could also catch re-engagement on worse terms under incoming anti-'fire and rehire' rules, pushing employers to review contract length, wording and renewal procedures now.
With uncapped dismissal payouts looming, will British employers stop offering permanent jobs?
A new watchdog can sue employers for you. How will this agency change UK workplaces forever?
A new law protects millions. But can the UK's legal system handle the coming flood of claims?
The UK Employment Rights Act 2025: How the Six-Month Unfair Dismissal Rule and Uncapped Compensation Will Reshape Workplaces from 2027
Overview
The UK Employment Rights Act 2025 brings major changes to employment law across England, Wales, and Scotland, starting 1 January 2027. It aims to strengthen job security and employee protections by reducing the qualifying period for unfair dismissal claims from two years to six months and removing the cap on compensation for unfair dismissal. These reforms mark a pivotal shift in employment relations, giving employees earlier and greater protection while increasing risks and responsibilities for employers. Businesses must review their policies and practices to adapt to this new legal landscape and ensure compliance with the upcoming changes.