Changes to unfair dismissal law – some key details are confirmed

Regulations have now been made confirming exactly which dismissals will be affected by the overhaul to unfair dismissal law on 1 January 2027. Separate regulations have brought clarification about the increase to the time limit for presenting a claim to the employment tribunal.

Unfair dismissal law is set to change radically on 1 January 2027 when the qualifying period of employment for bringing an unfair dismissal claim reduces from two years to six months and all limits on the compensatory award are removed. The sections of the Employment Rights Act 2025 (the 'Act') dealing with these changes are now fully in force and make it clear exactly which dismissals will be covered, namely those where the 'effective date of termination' falls on or after 1 January 2027. 

The 'effective date of termination' is specifically defined in employment legislation. Employers who are dismissing employees around the time of the change should make sure that they understand the date that an Employment Tribunal would regard as the dismissal date. This is not always the date as understood by the person dismissing and will depend on matters such as whether or not notice is given and when notice starts and ends. In addition, the effective date of dismissal will always be extended by the right to a week's statutory notice, which can catch an employer unawares. That statutory extension won't apply to the removal of the compensation cap however, so there will be a few cases where employees gain the right to claim after six months' service, but don't qualify for unlimited compensation.

Separate regulations have also confirmed that the increase in the time limit for bringing claims to the employment tribunal from three months to six months is highly likely to apply where the issue the individual is complaining about (such as dismissal or detrimental treatment) arises on or after 1 October 2026. Hence, it seems probable that someone dismissed or subjected to unlawful conduct such as sexual harassment on or after 1 October 2026 will have six months, not three months, to contact ACAS with a view to starting employment tribunal proceedings. 

Employers should take early advice to help them navigate these tricky changes.