Unfair dismissal changes from 1 January 2027

What's changing

Two changes from the Employment Rights Act 2025 take effect on 1 January 2027:

• The qualifying period for ordinary unfair dismissal falls from 2 years to 6 months.
• The cap on the compensatory award is removed. Today it's the lower of £123,543 or 52 weeks' gross pay. Both limits go.

Both apply by reference to the effective date of termination (the date employment ends), not the date someone started.

Who it affects

Anyone whose employment ends on or after 1 January 2027 with at least 6 months' continuous service can claim ordinary unfair dismissal. Someone dismissed shortly before 1 January 2027 without their statutory notice may also qualify, because statutory notice is added to the dismissal date when counting service.

Service counts from the first day of work, so the day before an anniversary completes the period. Someone who started on 2 July 2026 has 6 months' service on 1 January 2027, not 2 January. When you diarise probation decisions, work back from that date.

The uncapped compensatory award only applies where the actual date employment ended is on or after 1 January 2027. The notice extension doesn't count for that part.

Automatically unfair reasons, such as whistleblowing or pregnancy, already need no qualifying service, and that doesn't change.

What stays the same

The basic award is unchanged. It uses the same formula as statutory redundancy pay, with a week's pay capped at £751 from 6 April 2026. Claims still need Acas early conciliation first.

What employers should do now

• Review probation so decisions are made, recorded and explained within the first 6 months.
• Make sure anyone with 6 months' service facing dismissal gets a fair process: a reason, a meeting, the right to be accompanied, and an appeal.
• Expect settlement values to rise where the risk of an uncapped award is real.