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Major new changes announced to unfair dismissal reforms
December 9, 2025
The UK Government has announced major updates to its planned reforms of unfair dismissal law under the flagship Employment Rights Bill.
Our employment lawyer, Rachel, examines how these changes will impact employers, and how they can prepare.
Following a pledge made under the Labour Party’s pre-election manifesto in 2024, the UK Government has until now planned to introduce “day one” unfair dismissal rights under the Employment Rights Bill. This proposal meant that all employees in the UK would have the right to bring an unfair dismissal claim if they were dismissed, even if they were still in their probationary period.
This planned change was a major shift from the current eligibility threshold of 2 years’ completed employment before an unfair dismissal claim could be made.
However, following strong opposition from businesses and from the House of Lords, this proposal has been dropped.
The qualifying period for unfair dismissal will now be reduced to 6 months rather than being scrapped altogether – so employers will still be able to dismiss new employees if, for example, they are not suitable for the role or commit misconduct early in their employment.
In a new development, the current compensation “cap” in unfair dismissal cases will be removed, so that employees can potentially claim much more financial compensation if they are left out of work for a lengthy period following a dismissal. Currently, the cap is set at 1 year’s salary or £118,000, whichever is lower.
*It’s been announced that these changes are likely to come into force on 1 January 2027 – sooner than the previously-planned reforms.
The reduction of the qualifying period from 2 years to 6 months’ employment will undoubtedly lead to more unfair dismissal claims being brought against employers. However, setting the threshold at 6 months rather than day 1 will give employers a chance to apply probationary periods to their new starters and assess whether they are right for their roles without facing unfair dismissal claims during this time.
This is also expected to keep the labour market moving by reducing the risk that employers will be fearful to recruit new starters who will have full rights from day 1.
The lifting of the “cap” on compensation will technically increase the value of many unfair dismissal claims, making these more expensive for employers. However, we expect to see a balancing effect with this, as employees may now be encouraged to focus on ordinary unfair dismissal claims rather than trying to pursue complex claims for discrimination or whistleblowing in order to increase their compensation.
If you would like support reviewing your policies, or advice when it comes to understanding what the changes mean for your organisation, get in touch with Rachel Ford-Evans using our contact form, or reach us directly at rford-evans@darwingray.com or 02920 829 100 for tailored advice.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
