The Most Significant Change to ET Compensation in a Decade
The Employment Rights Act 2025 removes both statutory caps on unfair dismissal compensation (the lower of 52 weeks' gross pay or £118,223) from 1 January 2027. Tribunals will assess compensation based solely on the employee's actual financial loss.
Key Changes at a Glance
| Change | When | Impact on Expert Evidence |
|---|---|---|
| Unfair dismissal cap removed | 1 January 2027 | Precise loss quantification essential for every significant case |
| Qualifying period: 2 years to 6 months | 1 January 2027 | More claimants eligible; higher volume of expert evidence needed |
| Protective award doubled to 180 days | April 2026 | Higher collective redundancy exposure |
| Whistleblowing: sexual harassment added as qualifying disclosure | 6 April 2026 | More uncapped whistleblowing claims |
| SSP: waiting days removed, lower earnings limit removed | 6 April 2026 | Wider SSP entitlement, relevant to loss calculations |
Why Uncapped Awards Mean Expert Evidence Is Now Essential
Under the current capped regime, many ET cases settle with rough estimates of future loss because the cap limits exposure. From January 2027, for senior employees and high earners, uncapped awards mean the financial stakes are far higher. Tribunals will scrutinise actual loss evidence carefully, requiring the same rigour as High Court personal injury or commercial litigation.
The Polkey Question: More Important Than Ever
With the cap removed, Polkey deductions may become a crucial tool in an employer's arsenal when a tribunal is considering remedy for ordinary unfair dismissal, particularly when dealing with senior exits. Employment loss experts model the financial impact of different Polkey percentage outcomes, giving solicitors the data they need to advise clients on realistic exposure and settlement strategy.
What Solicitors Need to Do Now
- Review existing ET cases where dismissal date falls after 1 January 2027: uncapped rules will apply
- Instruct employment loss experts early in significant cases to establish baseline loss figures
- Consider Polkey arguments: document performance issues, process steps, and business case now
- Update standard Schedule of Loss templates for uncapped methodology
Employees Recruited Before 1 July 2026: Already Affected
Any employee recruited on or before 1 July 2026 will immediately gain the right to claim unfair dismissal on 1 January 2027, meaning the new law already impacts on recruiting decisions being made now.