The Employment Rights Act 2025 made considerable changes regarding employee’s rights when they are dismissed, fairly or unfairly. These are effective 01 January 2027 which means that 01 July 2026 is a pinch-point risk date that employers need to be aware of.
The Employment Rights Act 1996 in Great Britain, provides the potential reason that an employee can be dismissed fairly, including:
- Capability;
- Redundancy;
- A leal reason, for example, a travelling salesman cannot perform their duties of employment as they have been banned from driving; and
- Misconduct
The legislation also states 'some other substantial reason' which covers a wide-range of activities.
Generally, the employee will be entitled to receive notice and receive notice pay. However, in the cases of gross misconduct, an employer can dismiss an employee without giving notice (or pay).
It stands to reason, therefore, that any dismissal that is not fair is treated as unfair. Plus, there are some reasons that are automatically classed as unfair, such as dismissals during periods of maternity leave.
However, The Employment Rights Act 1996 provides protections to employees in the cases of dismissal:
1. Providing they have been employed for two years; they can request written reasons for their dismissal; and
2. Providing they have been employed for two years; they can take their case to the Employment Tribunal who are able to award a compensation payment, subject to a compensatory award cap of the lower of either £123,543 or 52 weeks’ gross pay
The Employment Rights Act 2025 updates the 1996 Great British Act and makes significant changes to the above that employers needs to be aware of. Firstly, from 01 January 2027, the requirement to have been employed for two years is removed which means:
1. An employee’s right to request written reasons for dismissal will apply after six months of employment; and
2. They can take their case to the Employment Tribunal to claim unfair dismissal after a qualifying period of six months employment
Further, the compensatory award compensation cap, currently £123,543 or 52 weeks’ gross pay will be removed. Note that the compensatory award compensation payment is in addition to the minimum basic award for unfair dismissal and remains unchanged.
On 26 May 2026, The Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026 gave effect to the dismissal provisions in the 2025 Act effective for dismissals on and after 01 January 2027.
For Bookkeepers
Note that 01 July 2026 is another date mentioned in the Commencement Regulations and this highlights the practical considerations for employers. The date highlights the retrospective nature of the application of the changes, as someone employed on and before 01 July 2026 will have achieved six months continuous service when the new rules come into force.
This date should not be ignored and ICB suggests employers will want to review and update their education, policies and procedures considering the above, in that:
- The new unfair dismissal rights will apply after six months continuous employment for termination dates from 01 January 2027; which means
- Employees hired on or before 01 July 2026 will have this length of service
With regard probationary periods, as the ‘Factsheet: Unfair Dismissal’ says, the six-month qualifying period was intended to be a statutory right from day one of employment, as per the ‘Plan to Make Work Pay’ document. However, although this has been extended (after opposition in the House of Lords), the contractual probationary period needs to be considered, as this will not override the new statutory employment right.
Employers may want to consider the length of a contractual probationary period so they are not unwittingly brought into the new regime from 01 January 2027.
