(4) UK Employment Rights Act – Unfair Dismissal “Double Whammy”: How Should Employers Prepare?

On 1 January 2027, the qualifying period for ordinary unfair dismissal will reduce to six months, down from the current two years, and the statutory cap on the compensatory award, currently £123,543, will be removed. Taken together, these changes will bring a much larger group of employees within the scope of ordinary unfair dismissal protection far earlier in their employment. In particular, recently hired, highly paid execs could start bringing multi-million dollar claims from 1 January 2027, even from a simple performance dismissal or redundancy.

For employers, this is not simply a New Year issue. A tapering effect has already started: employees hired on or after 1 July 2026 will have, or will quickly acquire, the six months’ service needed to benefit from the new regime once it takes effect. This means employers need to be making preparations now.