Unfair Dismissal: A Complete UK Guide

Unfair dismissal is being dismissed from your job without a fair reason, or without a fair process, or both. UK law gives employees the right not to be unfairly dismissed — but, importantly, the rules are changing. At present you generally need two years’ continuous service to claim ordinary unfair dismissal, but from 1 January 2027 that qualifying period drops to six months under the Employment Rights Act 2025, giving far more employees protection much sooner. Some dismissals are automatically unfair from day one, with no qualifying period at all. If a dismissal is found unfair, a tribunal can order reinstatement or compensation — a basic award plus a compensatory award currently capped at the lower of 52 weeks’ pay or £123,785. This guide explains, for employees and employers, what makes a dismissal unfair, the big 2027 change, the remedies, and how a claim works.

What unfair dismissal is

Unfair dismissal is a statutory right: an employee with the necessary qualifying service has the right not to be dismissed unfairly. A dismissal is fair only if the employer can show both that it had one of the five legally recognised fair reasons, and that it acted reasonably in treating that reason as sufficient to dismiss — which means following a fair procedure. If either element is missing, the dismissal is unfair. It is important to understand that unfair dismissal is about fairness, not about whether the employee did anything wrong: an employee can be guilty of misconduct and still be unfairly dismissed if the employer handled the process unfairly. Equally, dismissing someone for a good reason but with no proper process is a classic route to an unfair dismissal finding.

The qualifying period — and the big 2027 change

For most employees the right not to be unfairly dismissed currently requires two years’ continuous service. The Employment Rights Act 2025 will change this: rather than the day-one right originally proposed, a six-month qualifying period is expected to apply from 2027. Automatically unfair dismissals (such as those for whistleblowing or pregnancy) need no qualifying period at all.

This is the area undergoing the most significant change. Currently, an employee needs two years’ continuous service to bring an ordinary unfair dismissal claim. From 1 January 2027, under the Employment Rights Act 2025, that qualifying period reduces from two years to six months. The practical effect is dramatic: far more employees will be protected from unfair dismissal, and much earlier in their employment, than under the long-standing two-year rule.

One thing the change does not alter is the day-one protections: dismissals for automatically unfair reasons, and discrimination, have never required any qualifying period and still do not. For employers, the 2027 change means dismissal decisions in the first couple of years of employment will carry far more legal risk than before, and a fair process will matter from much earlier.

The five potentially fair reasons for dismissal

The five potentially fair reasons are set out in section 98 of the Employment Rights Act 1996: capability or qualifications, conduct, redundancy, breach of a statutory restriction, and “some other substantial reason”. Even where the reason is one of these, the dismissal is only fair if, under section 98(4), the employer acted reasonably in treating that reason as sufficient — judged on equity and the substantial merits of the case.

To dismiss fairly, an employer must rely on one of five reasons recognised in law:

Having a fair reason is only half the test. The employer must also show it acted reasonably — which is where the process comes in.

A fair process

Tribunals judge a dismissal against the “band of reasonable responses” test from Iceland Frozen Foods Ltd v Jones [1983] ICR 17: a dismissal is fair if it falls within the range of responses a reasonable employer might adopt, not whether the tribunal itself would have dismissed. For misconduct the classic test is British Home Stores Ltd v Burchell [1980] ICR 303 — a genuine belief in the misconduct, on reasonable grounds, after a reasonable investigation. Following the Acas Code of Practice on Disciplinary and Grievance Procedures is essential, and an unreasonable failure to follow it can increase any award by up to 25%.

Even with a fair reason, a dismissal is unfair unless the employer followed a fair procedure and acted within the “band of reasonable responses” — the range of responses a reasonable employer might adopt. A fair process generally involves: investigating the facts; informing the employee of the issue and the evidence; holding a fair meeting at which the employee can respond, with the right to be accompanied; giving the decision and the reasons; and offering a right of appeal. For misconduct and capability, the Acas Code of Practice on Disciplinary and Grievance Procedures sets the expected standard, and an unreasonable failure to follow it can increase any compensation by up to 25%. A fair process is not a tick-box exercise — it must be genuine, giving the employee a real opportunity to put their case before any decision is made.

Automatically unfair dismissals (no qualifying period)

Some dismissals are automatically unfair, meaning no qualifying period applies and the employee is protected from day one. These include dismissal for reasons connected with: pregnancy, maternity or other family leave; whistleblowing (making a protected disclosure); trade union membership or activities; health and safety activities; asserting a statutory right (such as the right to the minimum wage or paid holiday); jury service; and flexible working or part-time/fixed-term status in certain circumstances. Dismissal that amounts to discrimination on a protected characteristic is also unlawful from day one, under the Equality Act 2010. These protections are vital because they catch the dismissals the law regards as most serious, regardless of how long the employee has worked. An employer who dismisses for one of these reasons faces a claim even from a brand-new employee.

Constructive dismissal

You do not have to be sacked to be unfairly dismissed. Constructive dismissal occurs where an employee resigns in response to a serious breach of contract by the employer — conduct so fundamental that the employee is entitled to treat the contract as at an end. Examples include a significant unilateral cut in pay, a serious breach of the duty of trust and confidence, bullying or harassment that is not addressed, or a major unagreed change to duties or location. To claim, the employee must show a fundamental breach, that they resigned in response to it, and that they did not delay too long (which could be taken as accepting the change). Constructive dismissal claims are notoriously difficult to prove, because the bar of a “fundamental” breach is high and the employee has chosen to resign — so taking advice before resigning is strongly advisable.

Unfair dismissal versus wrongful dismissal

These two are often confused but are different. Unfair dismissal is a statutory claim about whether the dismissal was fair in reason and process. Wrongful dismissal is a contract claim — it arises where the employer dismisses in breach of contract, most commonly by failing to give the correct notice (or pay in lieu). A dismissal can be wrongful but fair, or unfair but not wrongful, or both. Wrongful dismissal has no qualifying period (it is a contract right) and its remedy is the pay the employee would have received during the proper notice period. Understanding which claim applies — or whether both do — matters, because they have different requirements, deadlines and remedies. Many dismissal disputes involve elements of both.

Remedies and compensation

If a tribunal finds a dismissal unfair, the remedies are reinstatement (getting the job back), re-engagement (a comparable job), or — most commonly — compensation. Compensation has two parts:

The compensatory award cap of £123,785 applies from 6 April 2026. Importantly, that cap is due to be removed under the Employment Rights Act 2025 from 2027, which could significantly increase potential awards. For automatically unfair dismissals such as whistleblowing or discrimination, the compensatory cap does not apply in any event, and awards can be much higher. An employee must also try to mitigate their loss by looking for new work, which can reduce the compensatory award.

How to bring an unfair dismissal claim

There is a strict process and a tight deadline. Before bringing a claim, the employee must notify Acas and go through early conciliation, which gives both sides a chance to settle. A tribunal claim must generally be started within three months less one day of the dismissal (the early conciliation process can extend this slightly). The claim is then heard by an employment tribunal. Because conducting tribunal litigation is a regulated activity, Hayhills advises on the merits and strategy and introduces a regulated litigator to act in the proceedings. The deadline is unforgiving, so anyone considering a claim should act quickly and take advice early — leaving it too late is one of the most common ways a good claim is lost.

Dismissing fairly: guidance for employers

For employers, avoiding unfair dismissal claims comes down to discipline and process. Always identify a genuine fair reason; investigate properly before deciding; follow the Acas Code; give the employee the issue, the evidence and a real chance to respond at a meeting where they can be accompanied; reach a reasonable decision within the band of reasonable responses; and offer an appeal. Document each step. With the qualifying period dropping to six months in January 2027, employers can no longer assume that employees in their first couple of years are outside the unfair dismissal regime — fair process will matter from much earlier in employment. A short, well-run procedure is far cheaper than defending a claim, and often produces a better outcome for everyone.

Dismissal during a probation period

Probation periods are widely misunderstood. A probation period is a contractual arrangement; it does not by itself remove or extend an employee’s statutory rights. Under the current rules, an employee dismissed during a probation period of, say, three or six months usually cannot claim ordinary unfair dismissal because they lack two years’ service — but they can still claim if the dismissal was for an automatically unfair reason or amounted to discrimination, and they are still entitled to their contractual and statutory notice. The position changes substantially from 1 January 2027: once the qualifying period falls to six months, employees dismissed after six months — including many who are still within a longer probation period — will gain ordinary unfair dismissal protection. The Employment Rights Act 2025 is expected to pair this with a lighter-touch process for dismissals during an initial period of employment, but the detail is being finalised. The practical message for employers is that probation will no longer be a “free pass” to dismiss without process much beyond six months, so fair handling of probationers will matter more.

The right to be accompanied and to appeal

Two procedural rights are worth highlighting because they are often overlooked. First, at a formal disciplinary or grievance meeting that could lead to dismissal or other serious action, the employee has a statutory right to be accompanied by a colleague or a trade union representative. Refusing a reasonable request can itself make a dismissal procedurally unfair. Second, a fair process almost always includes the right of appeal against a dismissal decision, heard where possible by someone not previously involved. A genuine appeal can correct an unfair decision before it reaches a tribunal, and a failure to offer one is a common procedural flaw. For employers, building these two rights into every dismissal process is a simple and effective way to reduce the risk of an unfair dismissal finding; for employees, knowing about them ensures the process is conducted properly.

The 2027 reforms and what they mean

The Employment Rights Act 2025 makes unfair dismissal one of the most significant areas of change in employment law for a generation. From 1 January 2027 the qualifying period falls from two years to six months; the cap on the compensatory award is due to be removed; and the right to written reasons for dismissal will also be available after six months rather than two years. Together these changes substantially expand employees’ protection and increase the potential cost to employers of getting a dismissal wrong. Much of the detail is being delivered through secondary legislation, so the precise rules continue to firm up — but the direction is clear and significant. Both employers and employees should treat the current period as a transition, and check the up-to-date position when a dismissal is in prospect, because the framework is changing in employees’ favour.

Worked example

Sam has worked for a company for three years and is dismissed for alleged misconduct, but the employer carried out no investigation, did not let Sam see the evidence or respond, and offered no appeal. The reason (conduct) might have been fair, but the process was not — so the dismissal is unfair. A tribunal could award Sam a basic award (calculated like redundancy pay, using the £751 weekly cap) plus a compensatory award for lost earnings while Sam looks for new work, up to the lower of 52 weeks’ pay or £123,785, reduced by what Sam earns or should reasonably earn elsewhere. Had Sam been dismissed for whistleblowing instead, no qualifying period would apply and the compensatory cap would not bite. The example shows that process is decisive, and that the reason for dismissal affects both protection and the size of any award.

Dismissal and discrimination

A dismissal can be both unfair and discriminatory, and the discrimination angle matters enormously because it has no qualifying period and no compensation cap. Under the Equality Act 2010, dismissing someone because of a protected characteristic — age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex, or sexual orientation — is unlawful from the first day of employment. So an employee with only a few months’ service, who could not (until 2027) claim ordinary unfair dismissal, may still have a powerful discrimination claim if the real reason for dismissal was, for example, their disability or pregnancy. Discrimination awards can include compensation for injury to feelings on top of financial loss, and are uncapped. For employers, this means dismissal decisions must be free of any link to a protected characteristic, and capable of being shown to be so. For employees, it means a dismissal that feels connected to who they are, rather than what they did, is worth examining closely even without two years’ service.

Settlement agreements and unfair dismissal

Many potential unfair dismissal disputes are resolved by a settlement agreement rather than a tribunal. This is a legally binding contract under which the employee receives an agreed payment — often more than they would get by simply being dismissed — in return for waiving their right to bring claims, including unfair dismissal. Settlement agreements are common where an employer wants certainty and a clean break, or where both sides would rather avoid the cost, delay and risk of litigation. For the agreement to be valid and to waive statutory claims, the employee must take independent legal advice on its terms, towards which the employer usually contributes. Whether to offer or accept a settlement, and on what terms, depends on the strength of the underlying claim, the sums involved and each side’s appetite for risk. Understanding the value of a potential unfair dismissal claim is essential to negotiating a fair settlement, which is why advice on the merits comes first.

If you have been dismissed: a checklist

If you think you have been unfairly dismissed, act promptly and methodically:

• Get the reason in writing — you can request written reasons for dismissal.
• Check your service — two years now, or six months from January 2027 — and whether a day-one protection applies.
• Identify the real reason — was it genuinely fair, or possibly automatically unfair or discriminatory.
• Assess the process — was there investigation, a fair meeting, the chance to respond, and an appeal.
• Use any internal appeal before or alongside considering a claim.
• Notify Acas for early conciliation as soon as possible.
• Note the deadline — generally three months less a day from dismissal.
• Take advice early on the strength of a claim and whether to negotiate a settlement.

Moving quickly protects your position, because the tribunal time limit is short and unforgiving.

What we see in practice

In our advisory work, employers rarely lose unfair dismissal claims because the underlying reason was bad; they lose them on process. The most common pattern we see is a fair reason undermined by a rushed or skipped procedure — no proper investigation, no genuine right of appeal, or a decision-maker who had already made up their mind. We also see employers conflate “I would have dismissed too” with the legal test, when the real question is whether the dismissal fell within the band of reasonable responses. A documented, Acas-compliant process applied calmly is almost always cheaper than defending the shortcut later.

Common mistakes to avoid

• Employers: good reason, bad process. A fair reason still needs a fair, documented procedure.
• Employers: assuming under-two-year staff are safe. From January 2027 the period drops to six months, and day-one claims already exist.
• Employers: ignoring the Acas Code. An unreasonable failure can add up to 25% to compensation.
• Employees: resigning too quickly. Constructive dismissal is hard to prove — take advice first.
• Employees: missing the deadline. Claims are generally due within three months less a day, after Acas conciliation.
• Both: confusing unfair and wrongful dismissal. They are different claims with different rules.

London employers and employees: a quick note

The unfair dismissal rules apply across England, Wales and Scotland, but London’s higher salaries make the compensatory award particularly significant: because that award reflects actual lost earnings up to the cap, a London professional’s potential claim can be large — and with the cap due to be removed in 2027, the exposure for employers rises further. London’s concentration of employers and employees also means dismissal disputes are common. For both sides, the priority is the same: employers should run fair, documented processes, and employees should understand their rights and the strict deadlines, taking advice early.

How Hayhills can help

Advising on dismissal is an employment and commercial matter, not a reserved legal activity, so Hayhills can help you directly. For employers, we help you dismiss fairly — the right reason, a proper Acas-compliant process, and clear documentation — to reduce the risk of a claim, and we help you prepare for the 2027 changes. For employees, we help you understand whether your dismissal was fair, the strength of any claim, and your options including a settlement agreement. Where a matter goes to the employment tribunal, which is a regulated activity, we work alongside and introduce a regulated litigator. Explore our employment advisory service or speak to Hayhills today.

This article is for general information only and does not constitute legal or accountancy advice. Hayhills Limited, trading as Hayhills Legal Advisory, provides non-reserved legal advisory services. Always check current requirements at GOV.UK.

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