Unfair dismissal in the UK: what employers must know to stay compliant

Published Wednesday 19 August 2026

Table of contents

• What is unfair dismissal in the UK?
• Who can claim unfair dismissal?
• What are fair and automatically unfair reasons?
• What procedure must employers follow?
• What are the claim steps and potential compensation?
• How to prevent unfair dismissal claims
• Simplify HR and payroll records with Xero
• FAQs on unfair dismissal UK

Key takeaways

• Unfair dismissal law requires a fair reason for dismissal and a fair, reasonable procedure aligned with the Acas code of practice. Having one without the other can still result in a tribunal finding against you.
• Employees usually need two years' continuous service to claim unfair dismissal, but this is expected to drop to six months from 2027, and there is no qualifying period at all for automatically unfair reasons such as pregnancy, whistleblowing, or asserting statutory rights.
• If a tribunal finds in an employee's favour, compensation can include a basic award and a compensatory award capped at one year's gross pay or £123,543 (from 6 April 2026), plus a potential 25% uplift if you didn't follow the Acas code.
• Prevention is always the better option: clear policies, consistent processes, detailed records, and early legal advice reduce your risk significantly.

What is unfair dismissal in the UK?

Unfair dismissal UK law protects employees from being sacked without a fair reason or without following a fair procedure. It's one of the most common employment tribunal claims, and small employers often face them simply because they didn't know the rules or rushed the process.

Unfair dismissal means you dismissed someone without a legally fair reason, or you had a fair reason but didn't follow a fair, reasonable procedure. It's distinct from wrongful dismissal, which is a breach of contract (for example, dismissing someone without notice when their contract requires it).

It's also different from constructive dismissal, where an employee resigns because your conduct made their position untenable. The employee treats themselves as dismissed and can claim unfair dismissal if they have the qualifying service.

Unfair dismissal laws require you to show two things: a fair reason for the dismissal, and that you acted reasonably in treating that reason as sufficient to dismiss. Even if you have a fair reason, you can still lose a tribunal hearing if you didn't investigate properly, didn't give the employee a chance to respond, or didn't consider alternatives to dismissal.

The law is set out in the Employment Rights Act 1996, and tribunals apply the Acas code of practice on disciplinary and grievance procedures. If you don't follow the Acas code, a tribunal can increase any compensation award by up to 25%.

What counts as constructive dismissal?

Constructive dismissal happens when an employee resigns because your conduct made their position untenable. The law treats their resignation as a dismissal, which means they can bring an unfair dismissal claim just as if you had sacked them directly.

The legal test is whether you fundamentally breached their employment contract. This can be a single serious act or a series of smaller acts that together amount to a breach. Common examples include:

• Demotion without consent: Moving someone to a lower-paid or lower-status role without agreement
• Removing responsibilities: Stripping out key duties without a fair reason
• Bullying or harassment: Allowing a hostile working environment to continue unchecked
• Unilateral pay cuts: Reducing pay without the employee's agreement

Constructive dismissal claims are often harder to defend than straightforward unfair dismissal because the conduct that triggered the resignation may have happened over months. If an employee raises a grievance about how they're being treated, take it seriously and respond promptly. Ignoring a grievance is one of the most common triggers for a constructive dismissal claim.

Who can claim unfair dismissal?

Not every employee can raise an unfair dismissal claim in the UK. To qualify, an employee usually needs two years' continuous service with you. This is the standard qualifying period, and it applies to most dismissals.

However, from 2027, the UK government plans to reduce the qualifying period tosix months for most employees. This change forms part of the Employment Rights Act 2025 reforms, and it will mean more employees can claim unfair dismissal much earlier in their employment. You can read the latest updates on the government's employment changes page.

There are important exceptions where no qualifying period is needed. If you dismiss someone for an automatically unfair reason (see the next section), they can claim unfair dismissal from day one, regardless of how long they've worked for you.

Employees must also have a contract of employment. Genuine self-employed contractors and most agency workers don't have unfair dismissal rights. And they must not have agreed to waive their right to claim (for example, in a settlement agreement when leaving a previous role).

If an employee does have the right to claim, they must do so within three months minus one day of their dismissal date (the "effective date of termination"). Before they can lodge a tribunal claim, they must notify Acas and go through early conciliation.

What are fair and automatically unfair reasons?

Unfair dismissal law divides reasons for dismissal into two groups: potentially fair reasons and automatically unfair reasons. You must have a reason that falls into the first group, and you must not have a reason that falls into the second.

Even if you have a potentially fair reason, you must still act reasonably. Tribunals ask: did a reasonable employer, in your circumstances, dismiss for this reason? Did you follow a fair process? Did you consider other options? Your size and resources matter; tribunals don't expect a five-person business to have the same HR infrastructure as a large company, but they do expect you to follow basic, fair processes.

Potentially fair reasons

There are five potentially fair reasons for dismissal under UK law. If your reason fits one of these, and you follow a fair procedure, the dismissal is likely to be fair:

• Capability or qualifications: The employee can't do the job to the required standard, or lacks a necessary qualification. Example: A delivery driver loses their driving licence and can no longer perform their role.
• Conduct: The employee's behaviour or actions breach your rules or standards. Example: An employee is repeatedly late despite warnings, or commits gross misconduct such as theft.
• Redundancy: The role is no longer needed because of business changes, closure, or reorganisation. Example: You close a branch and the roles there disappear.
• Statutory restriction: Continuing to employ the person would break the law. Example: An employee's visa expires and they no longer have the right to work in the UK.
• Some other substantial reason (SOSR): A catch-all for other genuine business reasons that don't fit the above. Example: A serious breakdown in working relationships that affects the business, or a business reorganisation that changes the employee's role fundamentally and they refuse the new terms.

For each of these, you must investigate, consult the employee, consider alternatives (like training, redeployment, or support), and follow a fair procedure before you decide to dismiss.

Automatically unfair reasons

Some reasons for dismissal are automatically unfair, regardless of how long the employee has worked for you. If you dismiss someone for one of these reasons, they can claim unfair dismissal from day one, and you will almost certainly lose. Common automatically unfair reasons include:

• Pregnancy, maternity, or related reasons: Dismissing someone because they're pregnant, on maternity leave, or took time off for antenatal care. Example: You make a woman redundant during her maternity leave without a genuine redundancy situation.
• Family leave: Dismissing someone for taking or requesting paternity, adoption, parental, or shared parental leave. Example: You refuse a request for shared parental leave and dismiss the employee when they insist.
• Health and safety: Dismissing someone for raising health and safety concerns or carrying out health and safety duties. Example: An employee reports unsafe working conditions and you dismiss them for "making trouble."
• Whistleblowing: Dismissing someone for making a protected disclosure (reporting wrongdoing in the public interest). Example: An employee reports financial fraud to a regulator and you dismiss them in retaliation.
• Trade union membership or activities: Dismissing someone for being a union member, taking part in union activities, or refusing to join a union. Example: You dismiss an employee because they're a union rep.
• Asserting a statutory right: Dismissing someone for claiming a legal right, like the national minimum wage, rest breaks, or statutory sick pay. Example: An employee asks for their legal holiday entitlement and you dismiss them for being "difficult."
• Part-time or fixed-term work: Dismissing someone because they work part-time or on a fixed-term contract, or because they refused to give up those rights. Example: You dismiss a part-timer because you want a full-time employee instead, without a fair reason.

You can find the full list and detailed guidance on GOV.UK's eligibility page.

If you're even considering dismissing someone for a reason that might be automatically unfair, get legal advice immediately. These claims carry significant risk and are very difficult to defend successfully.

What procedure must employers follow?

Having a fair reason is only half the battle. You must also follow a fair procedure. The Acascode of practice sets out the minimum steps, and tribunals will measure your process against it. If you don't follow the code, you risk a tribunal finding the dismissal unfair even if your reason was sound, and a 25% uplift in any compensation being awarded.

Here's the Acas-aligned process you should follow for most dismissals (especially conduct and capability):

1. Investigate and gather evidence

Before you take any action, investigate. Gather the facts: what happened, when, who was involved, what the impact was. Speak to witnesses, review records (timesheets, emails, complaints), and keep dated notes of everything.

If the issue is capability, consider whether the employee needs more training, support, or adjustments (for example, if they have a disability). If it's conduct, consider whether it's a one-off or part of a pattern, and how serious it is.

Always consider alternatives to dismissal: can you redeploy the employee to another role? Can you offer a final written warning instead? Can you provide support to help them improve? Document your thinking.

Keep all evidence secure and confidential. You'll need it if the case goes to tribunal.

2. Share allegations and invite to a meeting

Once you've investigated, write to the employee. Set out the allegations or concerns clearly, and tell them you're inviting them to a disciplinary (or capability) meeting to discuss it.

Give them reasonable notice: usually at least 48 hours, but longer if the matter is complex. Tell them they have the right to be accompanied by a colleague or trade union representative (this is a legal right). Share copies of any evidence you'll rely on in advance, so they can prepare a response.

Make it clear that dismissal is a possible outcome, so they understand the seriousness.

3. Hold the meeting and consider responses

At the meeting, explain the allegations or concerns, go through the evidence, and give the employee a full opportunity to respond. Listen carefully, take notes, and ask questions to understand their perspective. Stay calm, professional, and fair. Your job is to establish the facts and hear both sides

If they raise new information or evidence, you may need to pause and investigate further before making a decision. Don't rush to judgement in the meeting itself.

The employee can bring a companion, who can address the meeting, ask questions, and confer with the employee, but cannot answer questions on their behalf.

4. Decide and confirm the outcome

After the meeting, take time to weigh the evidence and decide. Consider: is the reason fair? Is dismissal a reasonable response, or is there a lesser sanction (warning, demotion, support plan)? Have you been consistent with how you've treated similar cases in the past?

If you decide to dismiss, write to the employee without unreasonable delay (ideally within a few days). Set out:

• your decision and the effective date of termination
• the reason for dismissal, with reference to the evidence
• their notice period and final pay arrangements
• their right to appeal, how to appeal, and the deadline (usually within five working days)

If you decide not to dismiss, confirm that in writing too, along with any warning, improvement plan, or support you're putting in place.

5. Offer and hear an appeal

You must offer the employee the right to appeal your decision. The appeal should be heard by someone more senior than the person who made the original decision, if possible (or at least someone who wasn't involved).

The appeal is a chance to review the decision: was the process fair? Was the decision reasonable? Is there new evidence?

After the appeal hearing, write to the employee with the outcome: uphold the dismissal, overturn it, or substitute a different sanction. Make it clear this is the final decision.

Keep records of the whole process, including investigation notes, meeting notes, letters, evidence.These are important documents to have if the employee brings a tribunal claim.

What are the claim steps and potential compensation?

If an employee believes they've been unfairly sacked, they can bring a claim to an employment tribunal. Here's the typical path:

1. Internal appeal: The employee should appeal your decision using your internal process (see above). This is not legally required, but it's good practice and can resolve the issue.
2. Acas early conciliation: Before they can lodge a tribunal claim, the employee must notify Acas and go through early conciliation. Acas contacts both parties and tries to help you reach a settlement (called a "COT3 agreement"). This is free, confidential, and usually lasts up to 12 weeks. Some claims settle at this stage. You can read more about Acas early conciliation.
3. Employment tribunal claim: If conciliation fails, the employee can submit a claim to the tribunal using the claim form ET1 (employment tribunal claim form). You'll receive the claim and have 28 days to respond on form ET3 (employer's response form). The tribunal will then case-manage the claim, exchange evidence, and eventually list a hearing.
4. Hearing and judgment: At the hearing, both sides present evidence and witnesses. The tribunal decides whether the dismissal was unfair. If they find in the employee's favour, they'll order a remedy (see below).

Unfair dismissal compensation

If you lose, the tribunal can order you to pay compensation. There are two main elements:

• Basic award: Calculated like statutory redundancy pay, based on the employee's age, length of service, and weekly pay. The weekly pay is capped at £751 (from 6 April 2026).
• Compensatory award: Covers the employee's actual financial losses from dismissal until they find new work, or until the hearing, whichever is sooner. This is capped at one year's gross pay or £123,543 (from 6 April 2026), whichever is lower.

The tribunal can also order reinstatement (give the employee their job back) or re-engagement (employ them in a different role), but this is rare in small businesses.

If you didn't follow the Acas code, the tribunal can increase the compensatory award by up to 25%. If the employee didn't follow it (for example, didn't appeal), the tribunal can reduce it by up to 25%.

Even if you win, tribunal claims demand a lot of time, money, and attention, so it pays to reduce your risk and resolve issues early where you can. Legal costs, management time, and reputational risk add up quickly. Prevention is always better than cure.

How to prevent unfair dismissal claims

The best way to handle unfair dismissal is not to face a claim in the first place. Here's a practical checklist to reduce your risk:

• Set clear standards and expectations from day one. Give every employee a written contract, a job description, and a copy of your staff handbook (including disciplinary and grievance procedures). Make sure they know what's expected.
• Use consistent policies and apply them fairly. Don't make up the rules as you go along. If you warn one employee for lateness, warn another in the same way. Inconsistency is a red flag for tribunals.
• Train your managers. Make sure anyone who manages people understands the basics of fair process, the Acas code, and when to get help. A well-meaning manager who rushes a dismissal can land you in tribunal.
• Keep dated, detailed records: Document performance issues, misconduct, meetings, warnings, and improvement plans as they happen. If you end up in tribunal, good records are your best defence. Use your accounting and payroll software to track attendance, hours, and pay accurately, and keep HR files up to date.
• Explore support and alternatives before you dismiss: Can you offer training, a performance improvement plan, redeployment, or reasonable adjustments? Can you issue a warning instead of dismissing? Tribunals expect you to consider these options.
• Follow the Acas code every time: Investigate, invite to a meeting, hear the employee, decide, confirm in writing, offer an appeal. Don't skip steps or rush.
• Get advice early: If you're thinking about dismissing someone, talk to an HR adviser or employment solicitor before you act. Early legal or HR advice can help reduce risk and avoid procedural mistakes.
• Close payroll and benefits cleanly: When someone leaves, make sure their final pay, holiday pay, and benefits are calculated correctly and paid on time. Disputes over money often trigger tribunal claims. You can learn more in this guide to hiring employees and employer responsibilities.

If you do face a claim, don't ignore it. Respond quickly, gather your evidence, and get legal advice. Many claims settle at early conciliation if you engage constructively.

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FAQs on unfair dismissal UK

Below are common employer questions to help you apply the guidance in real scenarios.

Is it worth fighting an unfair dismissal claim?

It depends on the strength of your case and the potential cost. If you followed a fair process, have good evidence, and genuinely had a fair reason, it may be worth defending, especially if the employee's claim is weak or speculative.

However, tribunal claims are expensive (legal fees, management time, stress) and the outcome is never certain.

Many employers settle at Acas early conciliation to avoid the risk and cost of a hearing. Get legal advice early to weigh your options.

What are the chances of an employer winning an unfair dismissal case?

Outcomes vary significantly depending on the evidence, procedure followed, and the specific facts of the case. However, many claims settle before hearing, and the outcome depends entirely on whether you had a fair reason and followed a fair process.

If you didn't follow the Acas code, didn't investigate, or dismissed someone for an automatically unfair reason, your chances of winning drop sharply. Good preparation and legal advice improve your odds.

Can an employee claim unfair dismissal under two years' service?

Usually, no. Employees need two years' continuous service to claim ordinary unfair dismissal. However, if you dismissed them for an automatically unfair reason (pregnancy, whistleblowing, health and safety, asserting a statutory right, and so on), they can claim from day one, regardless of service.

Also, from 2027, the qualifying period is expected to drop to six months for most employees, so more people will be able to claim earlier.

How long does Acas early conciliation take?

Acas early conciliation usually lasts up to 12 weeks. During this time, an Acas conciliator will contact both you and the employee to explore whether you can reach an agreement without going to tribunal. The process is free, confidential, and voluntary. If conciliation fails, the employee can proceed to lodge a tribunal claim.

What is the difference between unfair and wrongful dismissal?

Unfair dismissal is a statutory claim under employment law. This means you dismissed someone without a fair reason or without following a fair process, and they have the right to bring a tribunal claim (if they have qualifying service or the reason is automatically unfair).

Wrongful dismissal is a breach of contract claim. It means you dismissed someone in a way that broke their employment contract, usually by not giving them proper notice or pay in lieu of notice. Wrongful dismissal claims are often brought in the civil courts or employment tribunal, and the remedy is usually damages for the notice period.

You can have one without the other: for example, you might fairly dismiss someone for gross misconduct (no unfair dismissal) but still owe them notice pay if the contract required it (wrongful dismissal), or you might give full notice (no wrongful dismissal) but still act unfairly in your process (unfair dismissal).