The Employment Rights Act 2025 (ERA 2025) received Royal Assent on 18 December 2025 and represents the most significant overhaul of UK employment law in a generation. From January 2027, employees will gain unfair dismissal protection after just six months of service, down from the current two-year qualifying period, and the compensation cap will be removed entirely.
Losing your job is one of the most disorienting experiences a person can face. Beyond the direct financial pressure, there’s the uncertainty of not knowing whether the dismissal was lawful, and the anxiety of not knowing what, if anything, you can do about it.
For many employees, that uncertainty is compounded by a fundamental gap in knowledge about their rights. Under the current rules, the majority of workers need two years of continuous employment before they can bring an unfair dismissal claim. That’s a long time to be without meaningful protection.
That’s about to change. The Employment Rights Act 2025 received Royal Assent on 18 December 2025, marking the biggest shake-up to UK employment law in a generation. For employees, the most consequential change is simple: from January 2027, unfair dismissal protection will apply after just six months of employment.
This post explains what unfair dismissal means, how the ERA 2025 is changing the rules, the key dates you need to know, and what to do if you believe you’ve already been dismissed unfairly.
What Is Unfair Dismissal?
Unfair dismissal occurs when an employer ends a worker’s employment without a fair reason or without following a fair and reasonable process, even where a potentially fair reason exists.
Under current law, there are five potentially fair reasons for dismissal:
- Capability or qualifications – the employee is unable to do their job to the required standard.
- Conduct – the employee has behaved in a way that justifies dismissal.
- Redundancy – the role is no longer required by the business
- Statutory illegality – continuing employment would breach a legal obligation.
- Some other substantial reason (SOSR) – a catch-all category covering legitimate business reasons
Having one of these reasons isn’t enough on its own. The employer must also follow a fair procedure, including investigation, consultation, and the opportunity to appeal. Failure to do so can make an otherwise justifiable dismissal unlawful.
The major barrier for most employees has always been the qualifying period. Currently, workers must have two continuous years of employment before they can bring an unfair dismissal claim through an employment tribunal. The ERA 2025 is set to dramatically reduce that threshold.
How Does the Employment Rights Act 2025 Change the Rules?
The Employment Rights Act 2025 amends the Employment Rights Act 1996 and launches a phased programme of reforms. Several changes directly affect employees facing dismissal.
What changes to unfair dismissal are coming in January 2027?
The most significant reforms take effect in January 2027:
- Qualifying period reduced to six months. Employees will gain protection from unfair dismissal after just six months of continuous service, down from the current two-year requirement. According to the UK government, this change will extend unfair dismissal protection to a further 6.3 million employees.
- Compensation cap removed. The current statutory cap set at the lower of 52 weeks’ gross pay or £123,543 will be abolished entirely. Higher-earning employees in particular could receive significantly larger awards. For context, the average unfair dismissal award in 2023/24 was £13,749, with the highest uncapped award reaching £179,124 (according to Jones Day, February 2026).
- “Fire and rehire” becomes automatically unfair dismissal. Dismissing an employee in order to rehire them on worse terms or to replace them with someone doing substantially the same role on inferior terms will be automatically unfair in most circumstances. Financial difficulty is a limited exception.
What changes to employment tribunal time limits are coming in October 2026?
From October 2026, the time limit for bringing most employment tribunal claims will increase from three months to six months. This is a meaningful practical improvement. Three months is an extremely short window for someone who has just lost their job, is coping with financial stress, and may not yet have sought legal advice.
Are there any unfair dismissal protections already in force?
Yes. From 18 February 2026, dismissal for taking part in protected industrial action became automatically unfair with no qualifying period required. This protection now applies indefinitely, replacing the previous 12-week limit.
What Do the New Employee Rights Mean in Practice?
The shift from a two-year to a six-month qualifying period is the change with the widest practical impact. Employees in their probationary period, a group that previously had very limited recourse, will now have genuine legal protection far earlier in their employment.
That matters most for people in roles with high turnover, or for those who were dismissed shortly after raising a concern or following a period of illness. Previously, many of these employees had no effective remedy. From January 2027, they will.
The removal of the compensation cap changes the risk calculation for employers, particularly where senior or higher-earning employees are involved. It also means that employees who were previously deterred from claiming because the cap made the potential award disproportionate to the effort may now find it more worthwhile to pursue a claim.
The new “fire and rehire” protections offer concrete protections to workers who have encountered pressure to accept worse pay or conditions in exchange for their continued employment. This practice has been widely criticised for years. ERA 2025 treats it as automatically unfair, with limited exceptions.
Knowing these employee rights now, before a dispute escalates, gives you the clearest possible picture of your options.
What Should You Do If You Think You’ve Been Unfairly Dismissed?
If you believe your dismissal was unlawful, taking early action matters. Employment law is highly time-sensitive, and waiting too long can greatly limit your options.
Start by gathering evidence. Keep copies of your employment contract, payslips, any correspondence with your employer, letters or emails relating to the dismissal, and notes from any formal meetings. The more documented your record, the stronger your position.
Seek legal advice as early as possible. An employment law specialist can assess whether your dismissal has merit, explain your options, and help you understand the likely outcomes. This is not a process you need to go through alone.
Understand the tribunal process. Before you can bring a claim to an employment tribunal, you must first go through AACAS early conciliation, which is a legal requirement. ACAS will attempt to assist in resolving the dispute between you and your employer. If conciliation fails, you may proceed to the tribunal. Currently, the time limit for doing so is three months less one day from the date of dismissal; from October 2026, that window increases to six months.
Act before deadlines pass. Even with the extended time limits coming into force, delay can be costly. Evidence becomes harder to obtain, and witnesses’ recollections fade. Getting specialist guidance quickly preserves your options.
The team at RLL Legal provides expert and compassionate-support for people facing unfair dismissal, including same-day legal advice for urgent situations.
Frequently Asked Questions
What constitutes unfair dismissal?
Unfair dismissal occurs when an employer terminates employment without a legally recognized fair reason (capability or qualifications, conduct, redundancy, statutory illegality, or some other substantial reason), or without following a fair and reasonable process. Dismissal can also be “automatically unfair” in specific circumstances, for example, if it relates to whistleblowing, pregnancy, or (from February 2026) participation in protected industrial action.
How do you prove unfair dismissal?
To support an unfair dismissal claim, you will generally need to demonstrate that you were dismissed, that the dismissal lacked a fair reason, or that the employer failed to follow a fair procedure. Useful evidence includes your employment contract, written communications, records of disciplinary meetings, and any in-house HR correspondence. An employment lawyer can help you assess what you have and how to present it effectively.
How is unfair dismissal compensation calculated?
Unfair dismissal compensation consists of two elements: a basic award (calculated using your age, length of service, and weekly pay) and a compensatory award (based on your actual financial losses, such as lost earnings). From January 2027, the cap on compensatory awards will be removed entirely, meaning higher-earning employees may receive substantially larger sums than is currently possible.
What are the basic unfair dismissal rights in the UK?
Currently, employees with two or more years of continuous service have the right to claim unfair dismissal. From January 2027, that qualifying period drops to six months. Certain dismissals are automatically unfair regardless of service length, including dismissals related to pregnancy, whistleblowing, trade union membership, and (from February 2026) protected industrial action.
What evidence do I need to prove unfair dismissal?
Key evidence includes your employment contract and job description, written or email correspondence about your performance or conduct, records of any formal disciplinary or grievance meetings, letters confirming your dismissal and the stated reason, and any in-house HR policies your employer failed to follow. The stronger your documentary record, the better placed your legal adviser will be to assess your claim.
Know Your Rights Before You Need Them
The Employment Rights Act 2025 represents a genuine turning point for employee rights in the UK. The reduction of the unfair dismissal qualifying period to six months and the removal of the compensation cap represent the most substantial expansions of workplace protection this generation has seen.
Many of these changes are still being phased in. But the time to understand your rights is before a problem arises, not in the stressful aftermath of a dismissal, with a tribunal clock already ticking.
If you believe you have been unfairly dismissed or simply want to understand what your rights are under the new legislation, the employment law team at RLL Legal is here to help. We offer clear, practical advice, including same-day guidance where needed, from offices across Birmingham, Burnley, Blackpool, Surrey, and Stratford-upon-Avon.
For employers looking to understand what ERA 2025 means for your business, our Commercial Employment Law services provide active assistance to help you stay compliant.