New UK Dismissal Rules: What Raised Protections Mean for Global Employers

So let's see if we can distill it down to two, three, four main changes from the current legal context in the UK.

And maybe you can take us through really what the current rules are and what the major changes will be starting again at the end of 2026.

Yeah,

happy to.

So let's start with the current position, which is that Employees in the UK who have two years service with the same employer have the right not to be unfairly dismissed.

It's a statutory right.

What that means in practice is that if an employer wants to dismiss fairly an employee with a qualifying service, then they're going to need both to have a substantive fair reason and follow a procedurally fair approach.

The substantive reasons are set out in statute and are limited, but it's conduct, capability, redundancy, and illegality effectively.

The key usually is the fairness of the approach, and that's what slows employers down, and that's where employers get tripped up because there are codes of practice which you need to follow.

They take time, and it can be easy to get it wrong if you're not really clued up.

But at the moment, you've got a gap of two years in which you can effectively dismiss without worrying about falling foul of the legislation.

The other big difference is going to be a change to the compensation position.

At the moment, there is a cap on compensatory awards for unfair dismissal, and they're currently capped at one year's gross pay, or a maximum of 123,000 thereabouts, whichever is the lower figure.

So at least currently employers have a sort of maximum worst case sort of position which they can factor into their decision.

So that's the current position.

As to what's changing, well, the two principal changes are from the 1st of January that two-year qualifying period is going to be reduced to just six-month service.

So anybody who hits a six-month qualifying service period is going to have that unfair dismissal right.

So that's going to bring in a significantly greater number of employees into the protection regime.

And secondly, the statutory cap that I've just referred to is going to be removed.

There will be no cap on compensation at all.

Now, very different to the US where you've got all your punitive type issues.

It is compensatory, so it's still a question of loss, but potentially employees can recover the totality of their loss.

So big changes, John.

So let's see if we can distill it down to two, three, four main changes from the current legal context in the UK.

And maybe you can take us through really what the current rules are and what the major changes will be starting again at the end of 2026.

Yeah,

happy to.

So let's start with the current position, which is that Employees in the UK who have two years service with the same employer have the right not to be unfairly dismissed.

It's a statutory right.

What that means in practice is that if an employer wants to dismiss fairly an employee with a qualifying service, then they're going to need both to have a substantive fair reason and follow a procedurally fair approach.

The substantive reasons are set out in statute and are limited, but it's conduct, capability, redundancy, and illegality effectively.

The key usually is the fairness of the approach, and that's what slows employers down, and that's where employers get tripped up because there are codes of practice which you need to follow.

They take time, and it can be easy to get it wrong if you're not really clued up.

But at the moment, you've got a gap of two years in which you can effectively dismiss without worrying about falling foul of the legislation.

The other big difference is going to be a change to the compensation position.

At the moment, there is a cap on compensatory awards for unfair dismissal, and they're currently capped at one year's gross pay, or a maximum of 123,000 thereabouts, whichever is the lower figure.

So at least currently employers have a sort of maximum worst case sort of position which they can factor into their decision.

So that's the current position.

As to what's changing, well, the two principal changes are from the 1st of January that two-year qualifying period is going to be reduced to just six-month service.

So anybody who hits a six-month qualifying service period is going to have that unfair dismissal right.

So that's going to bring in a significantly greater number of employees into the protection regime.

And secondly, the statutory cap that I've just referred to is going to be removed.

There will be no cap on compensation at all.

Now, very different to the US where you've got all your punitive type issues.

It is compensatory, so it's still a question of loss, but potentially employees can recover the totality of their loss.

So big changes, John.