Employment Rights Act 2025 – What’s happening with UK unfair dismissal reforms?

Anyone trying to keep up with the complex twists and turns of proposed changes to UK unfair dismissal law in recent months will be forgiven if they have lost track of, or interest in, what’s happening. Now, 14 months after the Employment Rights Bill (ERB) was first published, and after months of debate, impasse, U-turns, and eleventh-hour curveballs, we finally have some clarity. The ERB has completed its passage through the UK Parliament, and the Employment Rights Act 2025 received Royal Assent today (18 December 2025), heralding the following important changes:

• The qualifying period of employment for a UK employee gaining unfair dismissal protection will be six months, reduced from the current two years. 

• The cap on the amount of compensation that can be awarded by an Employment Tribunal for unfair dismissal will be removed, leaving compensation unlimited in the same way as it is for discrimination and whistleblowing claims. 

• Employees will have six months from their termination date to initiate an unfair dismissal claim, up from the current three months.

Commencement regulations will be needed to bring the provisions into force, and the government has committed to an impact assessment on the removal of the compensation cap before the reforms take effect. It has been reported that the government has committed to a commencement date of 1 January 2027 for the new qualifying period. 

Assuming the new six month threshold applies to dismissals on or after 1 January 2027 (rather than only to new recruits from that date), anyone with at least six months’ service on 1 January 2027 will automatically gain protection from unfair dismissal on that date. None of this changes the existing exceptions which allow certain unfair dismissal claims (e.g. whistleblowing) to be brought without any minimum service requirement. 

These changes are significant, and employers should use the 2026 lead-in period to strengthen recruitment practices, review existing probationary periods, enhance performance management processes and look carefully at processes that apply to the expiry of fixed-term contracts. The importance of acting fairly is compounded by changes to the unfair dismissal compensation regime, with the financial stakes significantly raised for employers who get it wrong. 

Watch this space for our full analysis of the reforms and our tips on how employers can best prepare for the changes.