Unfair Dismissal New Rules 2027: What Changes on 1 January
The biggest change to unfair dismissal law in decades is now fixed in law. From 1 January 2027, the qualifying period drops from 2 years to 6 months, and the cap on compensatory awards is removed entirely. The government made the commencement regulations in June 2026, so these dates are confirmed, not proposals. Here is exactly what changes, who is covered, and what still applies until then.
- ✓From 1 January 2027 you need only 6 months' service to claim unfair dismissal (currently 2 years)
- ✓The compensatory award cap (£123,543 in 2026/27) is removed from the same date
- ✓Both changes are confirmed: commencement regulations were made in June 2026
- ✓The new rules apply where your dismissal takes effect on or after 1 January 2027
- ✓Until then, the current 2-year rule and cap still apply, day-one rights for automatically unfair reasons are unchanged
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What exactly changes on 1 January 2027?
Under the Employment Rights Act 2025, three connected changes take effect on 1 January 2027:
Who is covered, and from when?
The new rules apply where the effective date of termination is on or after 1 January 2027, even if notice was given before that date. In practice:
- ✓If your dismissal takes effect on or after 1 January 2027 and you have 6+ months' service, you can claim unfair dismissal
- ✓Anyone hired up to the end of June 2026 will already have 6 months' service when the new rules start
- ✓An estimated 6.3 million more employees gain unfair dismissal protection
- ✓If your dismissal takes effect on or before 31 December 2026, the current 2-year rule applies to your claim
- ✓The original 'day-one right' did not survive Parliament: the House of Lords forced the change to a 6-month qualifying period instead
What does removing the compensation cap mean?
Today, even if a tribunal finds you were unfairly dismissed and your actual losses are higher, the compensatory award is capped at the lower of £123,543 or 52 weeks' gross pay (2026/27). From 1 January 2027 that ceiling disappears for ordinary unfair dismissal: a tribunal can award your full proven financial loss, lost earnings, benefits and pension, with no upper limit.
- ✓The way compensation is calculated does not change, you still have to prove your losses and mitigate them by looking for work
- ✓The basic award is NOT changing: it stays capped (£751 a week, maximum £22,530 in 2026/27)
- ✓Higher earners and people with long job searches benefit most from the cap removal
- ✓The 2026/27 cap of £123,543 is expected to be the last, there will be nothing to uprate from April 2027
What applies right now (June 2026)?
Until 1 January 2027, the current rules apply in full. If you are dismissed today:
- ✓You need 2 years' continuous service for an ordinary unfair dismissal claim
- ✓Automatically unfair reasons (pregnancy, whistleblowing, asserting a statutory right, trade union activity and others) still need no qualifying period at all
- ✓Discrimination claims under the Equality Act 2010 are day-one rights with no compensation cap, that has not changed
- ✓The tribunal time limit is 3 months less one day, start Acas Early Conciliation as soon as possible
- ✓The Employment Rights Act 2025 will also extend most tribunal time limits from 3 to 6 months, but the government says that starts no earlier than October 2026, do not rely on it yet
Other Employment Rights Act 2025 changes already in force
The 2027 unfair dismissal package is the headline, but several ERA 2025 changes have already taken effect:
- ✓From 6 April 2026: Statutory Sick Pay from day one of sickness, with the lower earnings limit removed
- ✓From 6 April 2026: paternity leave and unpaid parental leave became day-one rights
- ✓From 18 February 2026: dismissal for taking part in lawful industrial action is automatically unfair
- ✓From 1 December 2025: Acas Early Conciliation can now last up to 12 weeks
- ✓Coming later in 2027: guaranteed-hours rights for zero-hours workers, reasonable notice of shifts and compensation for cancelled shifts
See our guides to sick pay and zero-hours contracts for the rules that already apply.
Get instant help right now
A Citizens Advice appointment can take weeks. Our free assistant is available 24/7 with no appointment, giving you clear, step-by-step answers about your exact situation, what to do next, and the deadlines that matter.
Need to take action? It can draft a ready-to-send formal letter for you (optional, from £4.99).
England, Scotland, Wales & Northern Ireland.
Frequently asked questions
What are the new unfair dismissal rules for 2027?
From 1 January 2027, under the Employment Rights Act 2025, the qualifying period for ordinary unfair dismissal drops from 2 years to 6 months, the cap on the compensatory award is removed entirely, dismissal for refusing a fire-and-rehire contract change becomes automatically unfair in most cases, and the right to written reasons for dismissal applies after 6 months' service. The commencement regulations were made in June 2026, so the date is fixed in law.
Is unfair dismissal becoming a day-one right?
No. The original proposal for a day-one right was changed during the Act's passage through Parliament, the House of Lords forced a compromise of a 6-month qualifying period instead, and the planned statutory probation framework was dropped with it. From 1 January 2027 you need 6 months' continuous service. Automatically unfair dismissals and discrimination claims remain day-one rights, as they are now.
When does the 2-year rule for unfair dismissal end?
On 31 December 2026. The 6-month qualifying period applies where the effective date of termination is on or after 1 January 2027, even if notice was given before that date. If your dismissal takes effect in 2026, the 2-year rule still applies to your claim.
Is the unfair dismissal compensation cap being removed?
Yes. From 1 January 2027 the cap on the compensatory award, £123,543 or 52 weeks' gross pay in 2026/27, is abolished for ordinary unfair dismissal in England, Scotland and Wales. Tribunals will be able to award full proven financial loss. The basic award remains capped at £22,530, and Northern Ireland keeps its own separate rules.
I was dismissed with 18 months' service in 2026, can I use the new rules?
No. The new 6-month qualifying period only applies where the dismissal takes effect on or after 1 January 2027. If your dismissal took effect in 2026, you need 2 years' service for an ordinary claim. However, check whether your dismissal was automatically unfair (pregnancy, whistleblowing, asserting a statutory right and others) or discriminatory, those routes have no service requirement and apply right now.
What is changing with fire and rehire?
From 1 January 2027, dismissing an employee for refusing to agree to changed contract terms (fire and rehire) becomes automatically unfair in most cases under the Employment Rights Act 2025. Until then, the statutory Code of Practice on dismissal and re-engagement applies, and tribunals can increase compensation by up to 25% where an employer ignores it.
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