Unfair dismissal is one of the most common employment law disputes in England, Wales and Scotland. This guide explains what unfair dismissal means, who is protected, the main defences available to employers, and how compensation is calculated, including the upcoming changes under the Employment Rights Act 2025.

What Is Unfair Dismissal?

Under the Employment Rights Act 1996 (ERA 1996), most employees have the right not to be unfairly dismissed by their employer. A dismissal can happen in one of three ways:

● Direct termination by the employer, with or without notice
● Non renewal of a fixed term or limited term contract
● Constructive dismissal, where the employee resigns in response to a serious breach of contract by the employer

A dismissal will only be unfair if the employer cannot show a fair reason for it, or if the employer acted unreasonably in the circumstances, for example, by failing to follow a fair process.

Who Can Bring an Unfair Dismissal Claim?

To claim unfair dismissal, a worker generally needs to:

● Be classed as an "employee" (rather than a worker or self employed contractor)
● Have been dismissed, as defined above
● Have the required length of continuous service, currently two years in most cases
● Have worked mainly in Great Britain, or have a sufficiently strong connection to Great Britain

Certain groups are excluded from bringing a claim, including those employed illegally, police officers, members of the armed forces, and share fishermen, among others. Some claims, such as dismissals connected to whistleblowing, health and safety, or trade union membership, do not require any minimum length of service at all, because they fall into the "automatically unfair" category discussed below.

Fair Reasons for Dismissal

An employer must show that the reason for dismissal falls into one of five potentially fair categories:

● Capability or qualifications, poor performance, incompetence, or ill health
● Conduct, including gross misconduct such as theft, violence, or serious breaches of company policy
● Redundancy, a genuine reduction in the need for employees to do a particular kind of work
● Statutory restriction, where continued employment would break the law (for example, losing a required licence)
● Some other substantial reason (SOSR), a flexible category covering situations that do not fit neatly elsewhere, such as a fundamental breakdown in working relationships

Simply having one of these reasons is not enough. A tribunal will also look at whether dismissal was a reasonable response and whether a fair procedure was followed.

Was the Dismissal Handled Fairly?

Even where an employer has a fair reason, a dismissal can still be found unfair if the process was flawed. Tribunals typically expect employers to:

● Carry out a reasonable investigation before deciding to dismiss
● Tell the employee clearly what the issue is
● Hold a meeting or hearing and let the employee respond
● Offer the right to appeal the decision

In misconduct and poor performance cases, employers are expected to follow the Acas Code of Practice on Disciplinary and Grievance Procedures. Where an employer wants to change contract terms and relies on dismissal and re engagement ("fire and rehire"), the statutory Code of Practice on Dismissal and Re engagement will usually apply instead. Tribunals judge the employer's decision against the range of responses a reasonable employer might have adopted, they do not simply substitute their own view of what should have happened.

Automatically Unfair Dismissals

Some dismissals are treated as automatically unfair regardless of any procedure followed, because the underlying reason is one the law specifically protects. Common examples include dismissal connected to:

● Pregnancy, maternity, or other family leave
● Whistleblowing (making a protected disclosure)
● Asserting a statutory employment right
● Health and safety activities
● Trade union membership or activities

Most automatically unfair dismissals do not require any minimum length of service, and dismissals for whistleblowing or health and safety reasons are not subject to the usual cap on compensation.

Time Limits for Bringing a Claim

An unfair dismissal claim must currently be lodged with an employment tribunal within three months of the employee's last day of employment (the "effective date of termination"), subject to a possible extension while Acas early conciliation takes place. Missing this deadline can be fatal to a claim, so early advice is important.

Remedies: What Can an Employee Recover?

If a tribunal finds a dismissal was unfair, it will consider, in order:

● Reinstatement, giving the employee their old job back
● Re engagement, offering a comparable role
● Compensation, by far the most common outcome in practice

Compensation usually has two parts: a basic award (calculated using age, salary, and length of service) and a compensatory award (reflecting the employee's actual financial losses). The compensatory award is currently subject to a statutory cap, although this is due to be removed for dismissals taking effect on or after 1 January 2027.

Upcoming Changes: The Employment Rights Act 2025

The Employment Rights Act 2025 (ERA 2025) received Royal Assent in December 2025 and will reshape unfair dismissal law from 1 January 2027. Key changes include:

● The qualifying period for ordinary unfair dismissal claims will fall from two years to six months
● The statutory cap on the compensatory award will be removed entirely
● The time limit for bringing a claim will double from three months to six months
● Stronger protections for employees dismissed during or after pregnancy or family leave
● New rules affecting dismissal and re engagement ("fire and rehire") practices

These reforms will significantly increase the number of employees eligible to bring claims, and remove the financial ceiling that currently limits compensation in most cases. Employers should review their disciplinary, performance management and redundancy procedures well ahead of the January 2027 commencement date.

Frequently Asked Questions

How long do I need to have worked somewhere to claim unfair dismissal?

Currently two years' continuous service in most cases, falling to six months from 1 January 2027. Some claims, such as those linked to whistleblowing or discrimination, have no minimum service requirement at all.

What is the difference between unfair dismissal and wrongful dismissal?

Unfair dismissal is a statutory claim under the ERA 1996 concerned with whether the reason and process for dismissal were fair. Wrongful dismissal is a common law claim concerned with whether the employer broke the terms of the employment contract, most often by not giving proper notice.

Can I still claim if I resigned?

Possibly. If you resigned in response to a serious breach of contract by your employer, this may count as constructive dismissal, which can still form the basis of an unfair dismissal claim.

How much compensation can I get?

This depends on your salary, length of service, age, and financial losses, and is currently subject to a statutory cap (removed from January 2027 for qualifying dismissals). A tribunal may also reduce compensation for contributory conduct or a failure to mitigate losses.

This guide provides general information only and is not legal advice. Anyone considering a specific contract claim or counterclaim, whether an employer or an employee, should contact us here contact@gec-law.co.uk for legal advice.