Unfair Dismissal Compensation Cap to be Abolished (Probably!)

The UK government has published a late amendment to the Employment Rights Bills, citing plans to abolish the statutory cap on compensation for ordinary unfair dismissal. The amendment removes section 124 of the Employment Rights Act 1996, which currently limits awards to either 52 weeks’ pay or the annual maximum.

If removed, compensation could become effectively unlimited, based solely on actual financial loss and tribunal discretion. The qualifying period to bring an unfair dismissal claim would also drop from two years to six months, allowing far more employees to challenge dismissals.

These changes significantly increase employers’ financial and legal risk. Awards could rise sharply, especially where employees struggle to find comparable work. The reforms would bring ordinary unfair dismissal claims closer to the uncapped systems used for discrimination and whistleblowing.

Employers are advised to strengthen dismissal procedures, documentation, and internal decision-making processes.

Source: Daniel Barnett

If you would like to discuss the impact of the Employment Rights Bill or support with dismissal claims, please contact our team on hello@starfordlegalhr.com