The Department for Business and Trade has published a summary of stakeholder views on cutting the unfair dismissal qualifying period to 6 months and removing the compensation cap, affecting employees and employers.
Key facts
- Who: Employees and employers. The roundtables involved groups representing employees and employers across the public and private sectors
- From: Published 28 May 2026; the government's stated intention is to implement the changes from 1 January 2027
- Source: Summary of stakeholder roundtables on unfair dismissal changes
The Department for Business and Trade (DBT) has published a paper summarising what stakeholders told it about changes to unfair dismissal law under the Employment Rights Act 2025. The paper is dated 28 May 2026.
What is changing
The Employment Rights Act 2025 reduces the qualifying period for claiming unfair dismissal from 2 years to 6 months. The qualifying period for asking an employer for written reasons for dismissal also falls from 2 years to 6 months.
Claims that currently have no qualifying period, such as most claims for automatically unfair dismissal, are not changed.
The Act also removes the cap on compensatory awards for successful unfair dismissal claims at employment tribunal. Awards will still be calculated on the actual and projected losses that the claimant can evidence. During the passage of the legislation, the government set out in Parliament its intention to implement these changes from 1 January 2027.
The roundtables
DBT held roundtables in January and February 2026. Groups representing employees and employers across the public and private sectors were invited to take part. It also held sector-specific sessions on request, including with the professional services, finance and technology sectors. The summary does not attribute views to individuals or representative bodies, because the discussions were held on a confidential basis.
What stakeholders said
- Participants acknowledged that the value of most claims is currently well below the existing cap, and it was confirmed that the method for calculating awards will not change.
- There was concern that removing the cap could affect business decisions, including basing operations in the UK and hiring, particularly for employers recruiting into highly paid roles.
- It was suggested that guidance on managing performance and dismissal in executive roles would help, and that further guidance on how awards are calculated, especially for executive roles, could support tribunals, employers and employees.
- The possible extra burden on the employment tribunal system was discussed, and concerns about capacity and capability were raised. Reforms to the Dispute Resolution System and further guidance and support for the tribunal were seen as important.
Next steps
DBT will provide guidance for employers and employees on the likely practical implications of the changes. It says guidance cannot change the law or anticipate developments in case law. DBT, with the Ministry of Justice, has set up the Dispute Resolution System Taskforce to consider longer-term reforms.
What this means for employees and employers
The Act shortens the qualifying period for an unfair dismissal claim, and for a request for written reasons for dismissal, from 2 years to 6 months. It also removes the cap on compensatory awards. The government's stated intention is to implement these changes from 1 January 2027.
Compensation will still be based on the losses a claimant can evidence, and the method of calculation is not changing. Claims that already have no qualifying period are unaffected.
DBT has said it will provide guidance for employers and employees on the practical implications. Anyone with a dismissal or a deadline in mind should check their dates and documents and get advice in good time.
Sources
- Department for Business and Trade, Summary of stakeholder roundtables on unfair dismissal changes, published 28 May 2026