Uncapped Unfair Dismissal Awards From 2027: Where Should You Get HR Advice?
Most small business owners have made their people decisions on instinct and a quick online search. Until now, that was often survivable. From 1 January 2027, getting it wrong becomes far more expensive.
Two changes arrive on the same day. The length of service needed to bring an ordinary unfair dismissal claim falls from two years to six months, and the statutory cap on the compensatory award is removed. As an HR consultant working with employers in St Albans and across London, I'm already seeing decisions made on guidance that will not stand up under the new rules. This article looks at the financial exposure and at where your HR advice comes from.
The two changes, side by side
Qualifying service: two years today, six months from 1 January 2027.
Compensatory award: currently limited to the lower of 52 weeks' gross pay or £123,543. From January there is no statutory upper limit.
Timing: no phased introduction. Anyone with six months' service on 1 January 2027 is protected straight away.
For perspective, the average unfair dismissal award in 2023/24 was £13,749, with a median of £6,746. Those figures were produced under a ceiling that is about to disappear, so awards at the top end could be considerably larger, depending on the employee's circumstances and losses.
Why a lower threshold changes everyday decisions
The headline numbers are one thing. The practical effect is felt in routine situations: a new starter who is not settling in, a role that is not working out, a manager who wants to move someone on quickly. Under the current rules, an employee with under two years' service rarely posed a tribunal risk. After January, most of your team will have the right to claim.
That does not stop you managing performance or ending employment. It means you need a fair reason, a fair process and a clear record. For the detail on the rules themselves, read our employer's guide to the six-month dismissal rules.
Five places employers look for HR answers, and what each can miss
Search engines
There is plenty of good HR content online, but dates matter. An article from a few years ago can look authoritative while describing a rule that has since changed, or one that applies in a different part of the UK.
AI chatbots
Tools such as ChatGPT give fast, confident answers and are useful for understanding a concept or tidying a draft email. They can also state outdated law as fact or overlook a detail that changes the outcome. Drafting a letter is low stakes. Deciding whether you can dismiss someone is not.
Social media groups
Fellow business owners mean well, but employment law turns on detail. Two cases that look identical in a LinkedIn or Facebook thread can end very differently once length of service, documents and conduct are taken into account.
The well-organised colleague
Many small firms hand HR to whoever is best with people and paperwork. That works for administration. It is harder when the same person must judge what needs recording, which questions to ask and where a simple step creates legal exposure.
Generic helplines
A helpline can answer straightforward queries. But if the adviser does not know your business, your people or the full history, the answer will be general, and general answers can miss the one point that matters.
What dependable HR support looks like
You do not need an HR professional in every conversation. You do need to know when a decision carries enough risk to pause and check first. Good support should:
Reflect the law as it stands today, not as it stood when an article was written.
Take account of the facts of your situation rather than offering a one-size-fits-all reply.
Set out the risks and your realistic options before you act.
Help you record your reasoning so the decision can be defended later.
Ten minutes confirming you are on firm ground is far cheaper than unpicking a decision afterwards. If you want to understand the wider picture, see the real cost of handling employment law yourself.
A quick readiness check before January 2027
Do you have a documented process for probation reviews and performance concerns?
Do you know where your HR advice comes from, and is it up to date?
If you needed to dismiss someone with seven months' service next week, would you know the steps to follow?
Have you reassessed your financial exposure now that compensation will no longer be capped?
These questions are not meant to alarm you. They are a practical way to find the gaps while there is still time to close them.
Frequently asked questions
When does the six-month unfair dismissal rule start?
From 1 January 2027. Employees who already have six months' continuous service on that date gain protection immediately.
Will unfair dismissal compensation be unlimited?
The statutory cap on the compensatory award is being removed, so there will be no fixed upper limit. The amount awarded will still depend on the employee's actual losses and the facts of the case.
Can I still end employment during probation?
Yes, but once the employee has six months' service you need a fair reason and a fair process. Take advice before acting.
HR consultant for businesses in St Albans and London
Progressive HR Solutions provides outsourced HR consultancy to small and medium-sized businesses in St Albans, Hertfordshire and across London. Whether you want to review your approach to probation and performance management or sense-check a decision before you make it, I can give you practical, commercially minded advice built around your circumstances.
This article is general information, not legal advice.
