Unfair dismissal compensation

The Employment Rights Act 2025 will remove the compensation award cap on unfair dismissal entirely.

Currently, compensation for unfair dismissal is limited to 52 weeks’ gross pay or a statutory cap (whichever is lower). The compensatory award cap, which increases in line with inflation every April, is currently £118,223.

It’s assumed these changes will come in at the same time as the unfair dismissal qualification period change on 1 January 2027.

The basic award for unfair dismissal will remain unchanged (and capped) but employees could then get unlimited compensation for their financial loss. This would bring unfair dismissal more in line with whistleblowing and discrimination claims, where compensation for financial loss is also uncapped. The key difference would be injury to feelings (which would not be available for simple unfair dismissal claims).