The Latest on Unfair Dismissal: Six-Month Qualifying Service Period and Uncapped Compensation

In November, the Government confirmed that it has dropped its manifesto commitment to remove qualifying service for ordinary unfair dismissal claims. Instead, it has accepted the House of Lords’ amendment to the Employment Rights Bill, which introduced a six-month qualifying service period before an employee can make an unfair dismissal claim. 

In addition, the Government intends to remove the caps on the compensatory award for successful unfair dismissal claims. At present, awards to former employees who successfully bring a claim are limited to either their annual salary or £118,223, whichever is lower. This change means ordinary unfair dismissal claims will be aligned with automatic unfair dismissal cases, where financial loss awards are uncapped.

Although the six-month qualifying service period makes life a little easier for employers than day-one unfair dismissal rights, this is still a significant change to the current two-year qualifying service period. As a result, there will have to be an increased focus on careful management of new starters and, in particular, the use of probationary periods, and effective recruitment practices.

Press reports indicate that these changes will come into effect from 1 January 2027. 

Simply-Docs will keep you updated on this and other upcoming changes under the Employment Rights Bill.