Unfair Dismissal Changes – The Clock Is Ticking

The unfair dismissal regime is changing with effect from 1 January 2027, when the cap on compensation will be removed, and the qualifying service period will reduce from two years to six months. 

Many employers have begun to review their existing staffing needs in good time, so that any dismissals or redundancies that may be necessary can be effected well before the deadline. One important point not tooverlook, however, is the interaction between the 1 January deadline and an employee’s contractual and statutory notice periods. Contractual notice periods are fairly straightforward, as (in most cases) an employer can make a payment in lieu so that employment comes to an end on the payment date – giving the employer control over the clock. 

The statutory notice mechanism is very different in that it operates to extend an employee’s deemed termination date (the so called ‘effective date of termination’). In other words, although a payment in lieu can still be made, the relevant statutory notice is always tagged on so that an employee’s effective date of termination is artificially extended. The statutory minimum is, broadly, one week for every year of service, up to a maximum of 12. That means that long-serving members of staff will have up to a 12-week statutory notice period, which in turn means that decisions need to be made relatively swiftly for that cohort. If we count backwards 12 weeks from 31 December, just before the regime changes on 1 January, we get to 9 October. Because the day on which notice is served is disregarded, we need to take 8 October as the last date on which notice of termination can be served for someone in that position, to prevent the new compensation scheme from applying.

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