Unfair Dismissal - Everything you need to know

Unfair dismissal occurs when an employer terminates an employee’s contract without a valid reason or without following a legally compliant and fair process. At present, an employee needs two years of continuous employment to make a claim for unfair dismissal in GB. However, the Government’s Employment Rights Bill, will change this soon to become a day-one right.

Individuals can claim automatic unfair dismissal even when they’ve been employed for under two years, currently, providing there are specific circumstances. It can be a common mistake in employment law to dismisses an employee within their first two years’ service without proper consideration.

If for example the reason for dismissal was considered discriminatory, the employee doesn’t need to have a qualifying service period. It is therefore imperative, that where an employee has a protected characteristic, as an employer, you follow a compliant and fair procedure, else you put yourself  and your business at risk of tribunal claims.

Call Croner today and talk to one of our employment law experts on, 0808 501 6651.

What is considered unfair dismissal?

It’s the termination of an employee’s contract without a fair reason, because of discrimination based on a protected characteristic, or in a direct contradiction with fair process.

Cases differ depending on a country’s legislation. However, when considering grounds for unfair dismissal in the UK, it’s often easier to look at what constitutes fair dismissal, as this can serve as a reference for judgement.

What are the five fair reasons for dismissal?

These are:

1. Conduct
2. Redundancy.
3. Capability.
4. Statutory restriction.
5. Other substantial reasons (SOSR).

The final point could be considered vague, but —that’s because it’s a “catch all” category covering all other legitimate reasons not covered by any of the other points.

“Some Other substantial reasons” essentially means some other substantial reason of a kind such as to justify the dismissal of an employee.  It must be substantial, and dismissal should always be an absolute last resort.

If you dismiss an employee for any reason outside of the five fair reasons, or fail to follow a fair procedure, an employee may have grounds for an unfair dismissal claim.

However, even if you dismiss an employee for a fair reason, you may not be off the hook because you must also follow a fair procedure.

Automatically unfair reasons for dismissal

The Equality Act 2010 identifies the nine protected characteristics that every employer must safeguard in the workplace. This means they need to ensure that they don’t treat employees less favourably due to one of these traits. If treated unfavourably or dismissed for reasons related to these traits, an employee can claim discrimination regardless of their length of service.

Most companies strive to make their workplace more inclusive.

In the following section, we will list the most common types of automatically unfair dismissal.

Automatically unfair dismissal examples

There are many reasons for termination of employment that could make the decision to dismiss automatically unfair and could lead to costly tribunal claims. As well as being connected to an employee’s protected characteristic, some of the main reasons for automatic unfair dismissal include dismissals connected to:

• Taking or asking to take leave for pregnancy, childbirth, adoption, or parental leave.
• Whistleblowing must be about a concern raised about either: a criminal offence happening; failing to comply with legal obligations; a miscarriage of justice; health and safety is endangered; the environment is damaged; or any action to conceal any of this.
• Raising a health and safety complaint
• Acting as an employee on a TUPE transfer or collective redundancy.
• Acting as a trade union representative
• Joining or not joining a trade union
• Participating in protected industrial action
• Asserting or trying to assert a statutory right (such as statutory sick leave, get pay slips or to take annual leave and statutory maternity pay)
• Asserting or trying to assert pay and working hours, contractual and legal rights, and requirements
• Undertaking jury service

This list should give you a fair idea of what to look out for when considering the risk of a dismissal being deemed to be automatically unfair. If in doubt, ask us today for employment law advice* so we can help you understand and avoid legal risks.

Remedies for automatically unfair dismissal

If the employee can demonstrate the employer let them go for any of the reasons seen above, they can claim compensation for automatic unfair dismissal. 

There are two elements to compensations. First, is the basic award which is calculated in a similar way to a statutory redundancy payment; second, the compensatory award which is designed to compensate and put the claimant back in the position that they would have been in (large part will be loss of earnings).

A high proportion of a compensatory award will be allocated to the loss of earnings and tribunals will look at past losses and future losses. From 6 April 2025 the weekly pay cap is £719 for purposes of calculating the basic award.

Besides paying damages, the company also might have to re-employ the staff member they dismissed.

What are the grounds for unfair dismissal?

As previously stated, failure to dismiss an employee for a fair reason can result in a legitimate unfair dismissal claim.

But failure to follow correct procedure, and treat the employee correctly during the dismissal, can also result for an ordinary unfair dismissal.

Whether a fair process has been followed depends on the reason for dismissal. If conduct, then a tribunal in an ordinary unfair dismissal claim would consider whether an employer has followed a fair procedure and will consider whether the ACAS code of practice on disciplinaries and grievances has been followed. If not, it could result in an increase to any award by up to 25%.

There are some guidelines that an employment tribunal court would consider, these are:

• Did you genuinely believe the reason for dismissal was fair?
• Did you carry out proper investigations?
• Did you follow the relevant procedures for dismissal?
• Did you inform the employee that you were considering dismissing them and take the time to listen to their view?
• Did you allow someone to accompany the employee to disciplinary or dismissal hearings?
• Did you give the employee the chance to appeal the decision?

That’s why it’s vital to follow procedures carefully and ensure you’re always fair when considering dismissing an employee.

You Must Follow a Fair Dismissal Procedure

Before you dismiss someone, you will usually have to go through the following steps:

• An informal chat with a note for improvement.
• A verbal warning.
• First written warning.
• Final written warning.
• Dismissal.

You can only jump straight to dismissal in cases of gross misconduct and even in such cases you should still insure a thorough and fair investigation and process beforehand. Make sure all staff have a copy of your procedures and policies. You should also cover your bases during disciplinary procedures by making written notes of all actions. Keep copies of all correspondence.

Unfair Dismissal During Probation Period

Sometimes an employer dismisses an employee while the employee is still on their probation period. If the reason for dismissal was not automatically unfair, then the employee needs two years' service to make a claim for unfair dismissal.

What Happens During an Appeal Hearing for Unfair Dismissal?

When you inform your employee about a disciplinary hearing outcome, any employees have the right to written reasons for dismissal when they have 2 years’ service. It's best to keep evidence of all correspondences.

You should explain what the employee did wrong, and why you have decided to move ahead with your outcome. If you don't follow the ACAS Code of Practice, you leave yourself exposed to an employee having a good case for an appeal.

Always ensure that your staff are aware of your appeals process. An employee appeals because they're challenging your decision.

They might be challenging the precise action you took, for example, to dismiss them and the way in which you proceeded. Or they might be challenging the evidence you used to reach your conclusion.

To remain impartial during the appeal process, you should involve another manager in the business—who was not involved in the initial investigation stage or disciplinary hearing—to preside over the appeal meeting. If this isn't an option, you could turn to your board of trustees if you have one.

If, instead, you decide to be the one who hears the appeal, despite first leading the disciplinary hearing, you must be fair, and you should be able to demonstrate that  there is no other option. You can't punish an employee for appealing.

You should inform the employee of the outcome of their appeal as soon as possible. Do so in writing. If following the appeal process the employee chooses to make a claim, they have three months minus one day to begin the process.

What happens if you lose an employment tribunal for unfair dismissal?

Unfair dismissal tribunal fees are gone. The Supreme Court abolished all tribunal fees in July 2017. Although the government have launched a consultation seeking views about whether to bring back in a fee of £55. 

How much compensation for unfair dismissal will I have to pay?

Unfair dismissal in the UK ordinarily results in compensation pay-outs. If the employment tribunal does rule in favour of your employee, they’ll instruct you on how much compensation you must pay.

Compensation normally consists of a basic award and a compensatory award. Sometimes an employer may have to pay an additional award if they fail to comply with a reinstatement or re-engagement order. This award is usually between 26 to 52 weeks’ pay.

The maximum basic award currently stands at £21,570 as of 6th April 2025.

What is the maximum compensation for unfair dismissal right now?

When working out the maximum amount you could pay as an award, you need to consider all the different types of unfair dismissal compensation pay-outs.

We’ve already outlined the basic award, so let’s start with the compensatory award.

As part of the compensatory award, tribunals will sometimes award a nominal amount by way of compensation for the loss of statutory rights when they have over 2 years’ service, usually between £400 and £500.  The tribunal will determine the actual amount you’ll pay.

Compensation for health & safety cases

If a dismissal is unfair by virtue of health & safety, trade union involvement, employee representation, or reasons to do with an occupational pension trustee, the minimum award is £8,763 from 6^th April 2025.

This figure is up from £8,533. The maximum award for an unfair dismissal involving health & safety, whistleblowing, or discrimination are uncapped and therefore can be significantly greater than the £118,223 cap.

How do I issue compensation payouts?

Due to the size of awards, you may want to know if you can pay compensation in instalments. Are any other methods of payment that don’t involve paying out all at once? Short answer: yes, it’s possible to pay in instalments. However, you need to agree certain terms with the employee, such as:

• The size of the pay-outs.
• When they’ll occur.
• How long they’ll occur for

Other scenarios requiring compensation awards

There may be other situations where you’re required to pay an award. Some employers request information on whether this affects how much is paid out and how you should pay.

Here we’ll look at a couple of the most common scenarios to see if there are any differences to note:

TUPE and unfair dismissal compensation

You’re at heightened risk of receiving unfair dismissal claims during TUPE. That’s why so many employers want to refresh their knowledge of the issue while undergoing a transfer.

When it comes to compensation, there are no differences from a regular unfair dismissal claim. The cap remains the same. There’s important TUPE advice for businesses you can learn about if you’re facing this situation.

Redundancy and unfair dismissal compensation

If you’re found to have unfairly dismissed an employee in a redundancy situation, you’ll need to pay them their redundancy pay entitlement plus their compensation. If you want to avoid a claim as a result of redundancy, make sure you follow the correct process.

Unfair dismissal and disability discrimination compensation

What you would want to consider in this scenario is the additional award for discrimination.

Unlike the capped pay-outs for unfair dismissal, the award for discrimination of any kind is unlimited. This means it will be scenario dependent. Also, the award for discrimination won’t cancel out the award for unfair dismissal.

If the tribunal finds you guilty of both, you must pay all the relevant awards.

Talk to a Croner HR advisor

Under the Government’s Employment Rights Bill, employers need to ensure that when dismissing staff, they ensure that compliance with the changes to employment legislation is followed every step of the way, to avoid a potential tribunal claim.

You might have perfectly valid reasons to end an employee’s service for your company. By checking them against the examples highlighted by the law you will start off on the right foot.

If in doubt over how to avoid making mistakes when dismissing staff members, we can help. Call our 24/7 HR advice line to get free advice today, on 0808 501 6651.