Unfair Dismissal, Wrongful Dismissal, and Redundancy Rights in England and Wales

Unfair Dismissal, Wrongful Dismissal, and Redundancy Rights in England and Wales

This article examines three closely related but legally distinct areas of employment law: unfair dismissal, wrongful dismissal and redundancy. Although all three concern the termination of employment, they arise from different legal principles, impose different obligations on employers and provide different remedies to employees.

An important feature of English employment law is that a dismissal may be lawful under one legal test but unlawful under another. An employer may have a contractual right to terminate employment but exercise that right in a manner that constitutes statutory unfair dismissal. Equally, a dismissal may be substantively fair but wrongful because the employer has failed to provide the required notice or payment in lieu of notice.

Redundancy introduces an additional dimension. It is a potentially fair reason for dismissal, but employers must establish that a genuine redundancy situation exists and comply with statutory consultation, selection, alternative employment and compensation requirements.

The principal legislative framework is the Employment Rights Act 1996, supplemented by the Trade Union and Labour Relations (Consolidation) Act 1992, the Equality Act 2010, the Working Time Regulations 1998 and relevant judicial decisions.

A particularly important legislative development concerns the Employment Rights Act 2025. Although it has introduced substantial reforms to unfair dismissal protection, the reduction of the ordinary qualifying period from two years to six months is scheduled to take effect on 1 January 2027, not immediately in October 2026. The distinction matters when determining the rights of employees dismissed during the transition period. Business Growth Service+2

1. Unfair Dismissal: The Statutory Right

The right not to be unfairly dismissed is established by section 94 of the Employment Rights Act 1996. It provides that an employee has the right not to be unfairly dismissed by their employer.

The protection applies to employees rather than workers generally or genuinely self-employed contractors. Consequently, determining employment status is often the first step in an unfair dismissal dispute.

The statutory framework distinguishes between the reason for dismissal and the fairness of the procedure used to reach the decision.

An employer must establish a potentially fair reason for dismissal under section 98 and demonstrate that the decision was reasonable in the circumstances.

1.1 Potentially Fair Reasons for Dismissal

Section 98(1) requires the employer to establish the reason, or principal reason, for dismissal. Section 98(2) identifies five broad categories of potentially fair reasons.

Capability or qualifications. An employee may be dismissed because they lack the ability, skills, qualifications or health necessary to perform their role. Capability can relate to professional competence, persistent underperformance, illness or other circumstances affecting the employee’s ability to undertake the work.

Conduct. Dismissal may result from misconduct, including dishonesty, serious negligence, insubordination, harassment, breaches of workplace policies or other unacceptable behaviour.

Redundancy. Where the employer’s requirements for employees to perform particular work have ceased or diminished, redundancy may constitute a fair reason for dismissal, provided that the statutory definition and procedural requirements are satisfied.

Illegality or statutory restriction. An employer may dismiss an employee where continuing the employment relationship would require the employer or employee to contravene a legal obligation. For example, an individual may no longer possess a legally required professional authorisation.

Some other substantial reason (SOSR). This is a residual category covering substantial business or organisational reasons that do not fall within the other statutory categories. Examples may include certain business reorganisations, serious conflicts affecting the employment relationship or the refusal of an employee to accept a proposed contractual change.

These categories establish potentially fair reasons, not automatic justification for dismissal. An employer must still demonstrate that dismissal was reasonable in the circumstances.

1.2 The Reasonableness Test

Section 98(4) establishes the general test of fairness.

The question is whether the employer acted reasonably or unreasonably in treating the established reason as sufficient grounds for dismissal, having regard to the circumstances of the case and the size and administrative resources of the organisation.

Employment tribunals do not simply substitute their preferred management decision for that of the employer. They examine whether the employer’s decision fell within the range of reasonable responses available to a reasonable employer in the circumstances.

This principle is particularly important in disciplinary cases, where different employers may reasonably assess the seriousness of misconduct differently.

The tribunal considers the evidence, the investigation, the procedure, the explanation provided by the employee and the proportionality of the sanction.

1.3 Procedural Fairness

A potentially fair reason does not automatically make a dismissal lawful.

The employer must follow a fair procedure appropriate to the circumstances.

In disciplinary dismissals, the Acas Code of Practice on Disciplinary and Grievance Procedures provides an important procedural framework.

The principal stages ordinarily include:

1. Establishing the relevant facts through a reasonable investigation.
2. Informing the employee of the allegations or concerns.
3. Giving the employee a reasonable opportunity to respond.
4. Holding a disciplinary hearing where appropriate.
5. Allowing the employee to be accompanied where the statutory right applies.
6. Reaching an impartial decision.
7. Communicating the decision and explaining the reasons.
8. Providing an opportunity to appeal.

The investigation should be sufficiently thorough to establish whether there is a reasonable basis for the allegations. In serious misconduct cases, an employer should not assume guilt before considering the employee’s explanation.

The employee’s right to be accompanied at a disciplinary hearing is principally governed by sections 10–15 of the Employment Relations Act 1999. It generally permits accompaniment by a fellow worker or an appropriately qualified trade union representative.

An appeal is also an important element of procedural fairness. Ideally, it should be considered by a manager who has not previously been involved in the decision.

The failure to follow the Acas Code does not automatically make a dismissal unfair. However, employment tribunals may take the Code into account and can increase or reduce relevant compensation by up to 25% where the statutory conditions are satisfied.

1.4 Dismissal for Misconduct

Conduct-related dismissals require particular attention to the investigation and the proportionality of the sanction.

In British Home Stores Ltd v Burchell [1980] ICR 303, the Employment Appeal Tribunal established an influential framework for assessing misconduct dismissals.

The traditional Burchell test asks whether:

• The employer genuinely believed the employee was guilty of misconduct.
• The employer had reasonable grounds for that belief.
• The employer had conducted as much investigation as was reasonable in the circumstances.

The tribunal must also consider whether dismissal fell within the range of reasonable responses.

A dismissal for gross misconduct may justify termination without notice, provided that the conduct and circumstances legally justify summary dismissal. However, even in serious cases, the employer should normally conduct a reasonable investigation and follow a fair disciplinary procedure.

1.5 Dismissal for Poor Performance or Ill Health

Capability dismissals involve different considerations from misconduct cases.

Where an employee performs below the required standard, the employer should normally identify the deficiencies, explain the expected level of performance and provide a reasonable opportunity for improvement.

Performance management may include training, supervision, additional resources and a performance improvement plan.

Dismissal should generally be considered only after reasonable attempts to address the problem have failed, taking account of the circumstances and the nature of the role.

Where dismissal relates to ill health, the employer should consider medical evidence, the likely duration of the condition, the possibility of alternative duties and reasonable adjustments.

The Equality Act 2010 is particularly important where the employee has a disability. An employer must consider its duty to make reasonable adjustments and must not discriminate because of disability.

Failure to consider appropriate adjustments may give rise to a discrimination claim independently of any unfair dismissal claim.

2. Automatically Unfair Dismissal

Certain reasons for dismissal are prohibited by law. These are commonly described as automatically unfair reasons.

Unlike ordinary unfair dismissal, protection against most automatically unfair reasons does not depend on completing the ordinary qualifying period of employment.

Examples include dismissal because an employee:

• Is pregnant or exercises pregnancy-related rights.
• Takes or seeks to take statutory maternity, paternity, adoption or other protected family leave.
• Asserts a statutory employment right.
• Makes a protected disclosure under whistleblowing legislation.
• Participates in lawful trade union activities or exercises relevant trade union rights.
• Takes part in certain protected industrial action.
• Raises qualifying health and safety concerns.
• Performs certain duties as an employee representative.
• Exercises rights concerning working time or the National Minimum Wage.

The precise statutory protection varies according to the reason for dismissal and the relevant legislation.

For example, section 103A of the Employment Rights Act 1996 makes dismissal automatically unfair where the reason, or principal reason, is that the employee made a protected disclosure.

Section 99 provides protection in specified pregnancy and family-leave circumstances.

Sections 100 and 101 address particular health and safety and employee representative situations.

The importance of automatically unfair dismissal lies in the fact that an employer cannot justify a prohibited reason by demonstrating that it acted reasonably from a general business perspective.

A genuine operational concern, for example, cannot legitimise dismissal because an employee exercised a protected statutory right.

3. Constructive Dismissal

Constructive dismissal arises when an employee resigns in response to a fundamental breach of contract by the employer.

Section 95(1)(c) of the Employment Rights Act 1996 recognises constructive dismissal as a form of dismissal where the employee terminates the contract, with or without notice, in circumstances in which they are entitled to terminate it without notice because of the employer’s conduct.

Unlike ordinary dismissal, the employer does not formally terminate the employment relationship. Instead, the employee resigns because the employer’s conduct has fundamentally undermined the contractual relationship.

3.1 Fundamental Breach of Contract

The employer’s conduct must amount to a repudiatory breach of contract.

Examples may include:

• A substantial unilateral reduction in salary.
• A serious breach of contractual duties.
• Persistent workplace bullying or harassment.
• A fundamental breach of the implied duty of mutual trust and confidence.
• An unjustified demotion or substantial alteration of responsibilities.
• Serious failures to protect the employee from workplace mistreatment.

The breach may consist of a single serious incident or a series of connected events.

3.2 The Last Straw Principle

In cases involving a continuing course of conduct, an employee may rely on the cumulative effect of several incidents.

The last straw principle was examined in Omilaju v Waltham Forest London Borough Council [2005] EWCA Civ 1493.

The Court of Appeal explained that the final incident does not necessarily have to constitute a fundamental breach independently. It must, however, contribute to the overall course of conduct and cannot be entirely innocuous.

This principle allows employees to rely on a continuing pattern of employer conduct rather than treating each incident in isolation.

3.3 Resignation and Acceptance of the Breach

An employee claiming constructive dismissal must generally resign in response to the employer’s fundamental breach.

An excessive delay or continued conduct indicating acceptance of the contractual arrangement may undermine the claim, although the circumstances must be examined carefully.

The employee does not necessarily have to resign immediately, particularly where they are attempting to resolve the situation through an internal grievance procedure.

However, the relationship between the breach, the employee’s response and the timing of resignation is legally important.

Constructive dismissal is not established merely because an employee dislikes their working conditions or considers management decisions unreasonable.

The conduct must reach the legal threshold of a fundamental contractual breach.

4. Wrongful Dismissal: Breach of Contract

Wrongful dismissal is conceptually different from unfair dismissal.

It is a contractual claim arising when an employer terminates employment in breach of the employment contract.

The most common example is dismissal without the required notice or payment in lieu of notice.

Unlike ordinary unfair dismissal, wrongful dismissal does not depend on a minimum period of service.

An employee may bring a wrongful dismissal claim from the beginning of employment if the employer breaches the applicable contractual obligations.

4.1 Contractual and Statutory Notice

Section 86 of the Employment Rights Act 1996 establishes minimum statutory notice periods.

An employer must generally provide:

• At least one week’s notice after one month of continuous employment.
• One week’s notice for each complete year of continuous employment between two and twelve years.
• A maximum of twelve weeks’ notice after twelve or more years of continuous employment.

These are statutory minimums. An employment contract may provide a longer notice period.

The employee must generally provide at least one week’s notice after one month of employment, unless the contract requires a longer period.

An employer cannot contract out of the employee’s statutory minimum entitlement to notice.

4.2 Payment in Lieu of Notice

An employment contract may contain a payment-in-lieu-of-notice clause, commonly referred to as a PILON clause.

Where the clause applies, the employer may terminate employment immediately and pay the contractual amount due instead of requiring the employee to work through the notice period.

The calculation should follow the contractual provisions and applicable statutory requirements.

It may include basic salary and other contractual benefits, depending on the wording of the agreement.

Where there is no contractual PILON provision, an employer may still offer payment in lieu, but the legal consequences depend on the circumstances and the employee’s agreement.

4.3 Summary Dismissal and Gross Misconduct

An employer may dismiss an employee without notice where the employee has committed a sufficiently serious breach of contract amounting to repudiatory conduct.

This is commonly described as summary dismissal.

Examples may include serious dishonesty, deliberate violence, serious insubordination or other conduct fundamentally incompatible with the continuation of employment.

However, the employer must establish that the conduct legally justified immediate termination.

If the conduct does not amount to gross misconduct, dismissal without notice may constitute wrongful dismissal even if the employer had a potentially fair reason to dismiss the employee following proper notice.

4.4 Contractual Disciplinary Procedures

Wrongful dismissal may also arise where an employer breaches a contractually binding disciplinary procedure.

Not every workplace policy forms part of the employment contract. The question is whether the relevant provision has contractual effect.

Where an employer has incorporated a disciplinary or redundancy procedure into the contract, failure to comply may constitute a breach of contract.

This is distinct from the statutory fairness assessment under the Employment Rights Act 1996.

4.5 Remedies for Wrongful Dismissal

The principal remedy is damages designed to place the employee in the financial position they would have occupied had the contract been performed correctly.

The usual claim concerns remuneration and contractual benefits that would have been received during the unexpired notice period.

A wrongful dismissal claim does not ordinarily provide compensation for the emotional distress associated with losing employment.

Claims may be brought in the employment tribunal, subject to its contractual jurisdiction and financial limits, or in the civil courts.

Employment tribunals generally have jurisdiction over qualifying breach-of-contract claims arising or outstanding on termination, subject to a maximum award of £25,000.

The civil courts may hear contractual claims outside the tribunal’s jurisdiction or where their procedural and remedial powers are more appropriate.

5. Redundancy: Definition and Legal Requirements

Redundancy is a potentially fair reason for dismissal under section 98(2)(c) of the Employment Rights Act 1996.

It is also the basis for a separate statutory entitlement to redundancy payments.

Section 139 defines the circumstances in which a dismissal is treated as being by reason of redundancy.

A redundancy situation generally exists where:

1. The employer has ceased or intends to cease carrying on the business for which the employee was employed.
2. The employer has ceased or intends to cease carrying on that business at the location where the employee worked.
3. The employer’s requirements for employees to perform work of a particular kind have ceased or diminished, or are expected to do so.

The statutory definition focuses on the employer’s requirements for employees rather than simply the continued existence of the business.

A company may continue operating successfully while reducing the number of employees required to perform particular functions.

For example, automation may reduce the need for administrative personnel, a business restructuring may eliminate overlapping managerial positions, or the closure of a department may remove the need for employees performing specialised duties.

5.1 Genuine Redundancy

The employer must establish a genuine redundancy situation.

A dismissal does not become redundancy merely because the employer uses that description.

For example, dismissing an employee because of misconduct and subsequently recruiting another person to perform substantially the same role may indicate that the real reason was not redundancy.

However, the existence of a replacement position does not automatically disprove redundancy. The duties, organisational structure, location and business requirements must be examined.

The central question is whether the employer’s requirement for employees to perform the relevant work has genuinely ceased or diminished.

5.2 Redundancy and Reorganisation

Business restructuring frequently produces difficult questions concerning the distinction between redundancy and dismissal for some other substantial reason.

An organisation may reorganise its management structure, merge departments or introduce new operational arrangements.

Where the employer no longer requires employees to perform work of a particular kind, redundancy may arise.

Where the employer continues to require the work but seeks to change the contractual arrangements, the legal analysis may be different.

In some circumstances, an employer may propose terminating existing contracts and offering new contracts with different terms, a practice commonly described as fire and rehire.

The legality of such action depends on the circumstances, the contractual rights involved and the statutory restrictions on dismissal and collective consultation.

6. Redundancy Selection: Pools, Criteria and Fairness

Once a genuine redundancy situation exists, the employer must determine which employees are affected.

The selection process is a significant element of procedural fairness.

6.1 The Selection Pool

The selection pool identifies the employees who are potentially at risk of redundancy.

The employer must consider which employees perform similar work, whether their roles are interchangeable and how the business is organised.

The selection pool should not be artificially restricted to one individual simply to ensure that a predetermined employee is dismissed.

The courts have recognised that employers generally have some discretion in determining the appropriate pool, but the decision must be reasonable in the circumstances.

6.2 Selection Criteria

Where several employees are competing for a reduced number of positions, the employer should apply fair and objective selection criteria.

Common criteria include:

• Relevant skills and qualifications.
• Performance and competence.
• Disciplinary and attendance records, where lawfully and fairly considered.
• Relevant experience.
• Adaptability to future business requirements.

The criteria should be applied consistently and supported by evidence.

Subjective assessments are not necessarily unlawful, but they should be capable of reasonable explanation and should not disguise discrimination or predetermined selection.

6.3 Protected Characteristics and Discriminatory Selection

Redundancy selection must comply with the Equality Act 2010.

An employer cannot select an employee because of a protected characteristic.

For example, selecting an employee because of pregnancy, disability, sex, race, age or trade union-related protected activity may give rise to legal claims.

Absence-related selection criteria require particular care where absences arise from disability, pregnancy or other legally protected circumstances.

In addition, employees benefiting from certain statutory family-leave protections have enhanced rights to be offered suitable alternative vacancies in relevant redundancy situations.

The precise protection depends on the applicable statutory provisions and the employee’s protected period.

7. Consultation: Individual and Collective Obligations

Consultation is an essential part of a lawful redundancy process.

It provides employees with an opportunity to challenge the proposed decision, suggest alternatives and examine the selection process.

Consultation must take place while the employer’s proposals remain genuinely open to consideration.

An employer that has already made a final decision to dismiss particular employees before consultation risks rendering the process unfair.

7.1 Individual Consultation

Employers should consult individually with employees at risk of redundancy.

The discussion should address:

• The reasons for the proposed redundancies.
• The number and types of positions affected.
• The selection pool and criteria.
• Possible alternatives to dismissal.
• Opportunities for redeployment.
• The employee’s individual circumstances and representations.

There is no universal statutory minimum duration for individual consultation. However, it must be meaningful and sufficient in the circumstances.

The employer should genuinely consider suggestions that may avoid or reduce redundancies.

7.2 Collective Consultation

Collective consultation is governed principally by sections 188–198 of the Trade Union and Labour Relations (Consolidation) Act 1992.

It becomes mandatory where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

The employer must consult the recognised trade union or, where appropriate, elected employee representatives.

The statutory minimum consultation periods are:

• 30 days before the first dismissal takes effect where 20–99 redundancies are proposed.
• 45 days where 100 or more redundancies are proposed.

Consultation must address ways of avoiding the dismissals, reducing their number and mitigating their consequences.

The employer must also provide the required information concerning the proposals and comply with the applicable notification requirements.

The collective consultation obligation is separate from individual consultation. Compliance with one does not eliminate the need to comply with the other.

7.3 Protective Awards

Failure to comply with collective consultation obligations may result in a protective award.

From 6 April 2026, the maximum protective award increased from 90 to 180 days’ full pay for each affected employee.

This is an important recent development under the Employment Rights Act 2025.

A protective award is distinct from statutory redundancy pay and unfair dismissal compensation. It is intended to address the employer’s failure to comply with collective consultation obligations.

An employee does not need two years of continuous service to qualify for a protective award.

8. Suitable Alternative Employment

Before making an employee redundant, an employer should consider whether suitable alternative employment is available within the organisation or an associated employer where the statutory provisions apply.

The alternative position should be assessed by reference to its suitability and appropriateness for the particular employee.

Relevant factors include:

• Salary and financial benefits.
• Working hours.
• Location and commuting requirements.
• Responsibilities and seniority.
• Skills and qualifications.
• Other contractual conditions.

An alternative position may be available even where it involves different duties or a modified working arrangement.

8.1 The Four-Week Trial Period

Under section 138 of the Employment Rights Act 1996, an employee who accepts suitable alternative employment generally has a statutory four-week trial period.

The trial allows both parties to assess whether the new position is appropriate.

A longer trial period may be agreed where retraining is necessary, subject to the statutory requirements for a written agreement specifying the relevant arrangements.

If the employee reasonably concludes that the alternative position is unsuitable and terminates the arrangement during the applicable trial period, they may retain their entitlement to statutory redundancy pay.

By contrast, an unreasonable refusal of suitable alternative employment may result in the loss of redundancy payment entitlement.

8.2 Priority for Certain Protected Employees

Special protection applies to certain employees during pregnancy and specified periods associated with maternity, adoption, shared parental and other protected family leave.

Where the statutory conditions are met, an employer must offer a suitable alternative vacancy to an eligible protected employee in preference to other employees at risk of redundancy.

This is a priority right rather than merely a general obligation to consider redeployment.

The precise duration and scope of the protection depend on the applicable statutory provisions.

9. Statutory Redundancy Pay

Statutory redundancy pay is a financial entitlement available to qualifying employees dismissed by reason of redundancy.

Under section 135 of the Employment Rights Act 1996, an employer must pay statutory redundancy compensation where the statutory conditions are satisfied.

The ordinary qualifying requirement is at least two years of continuous employment with the employer.

The calculation is based on:

• The employee’s age.
• Their completed years of continuous service.
• Their weekly pay, subject to the statutory maximum.
• A maximum of 20 years of service.

The statutory calculation provides:

Half a week’s pay for each complete year of service during which the employee was under 22.

One week’s pay for each complete year of service during which the employee was aged 22 or over but under 41.

One and a half weeks’ pay for each complete year of service during which the employee was aged 41 or over.

The calculation uses the employee’s age during each relevant year of service.

As at 6 April 2026, the maximum statutory weekly pay used in the calculation is £751, producing a maximum statutory redundancy payment of £22,530.

These figures are subject to annual statutory revision.

An employment contract or collective agreement may provide enhanced redundancy payments above the statutory minimum.

9.1 Continuous Employment

Continuous employment is important because the qualifying period and redundancy payment calculation depend on it.

Certain temporary interruptions do not necessarily break continuity, and statutory rules determine which periods count.

Where an employee has worked for associated employers or has transferred under applicable legislation, additional rules may affect the calculation.

9.2 When Redundancy Pay May Be Lost

An employee may lose their entitlement to statutory redundancy pay in certain circumstances.

Examples include an unreasonable refusal of suitable alternative employment or failure to satisfy the statutory qualifying conditions.

An employee who accepts an alternative position without a valid reason for subsequently rejecting it may also encounter difficulties establishing entitlement.

The statutory framework must therefore be considered alongside the circumstances of the particular redundancy process.

10. Notice, Holiday Pay and Other Final Entitlements

Redundancy does not remove the employer’s obligation to satisfy the employee’s other contractual and statutory entitlements.

An employee made redundant will generally be entitled to:

• The applicable notice period or payment in lieu.
• Outstanding salary.
• Accrued but untaken statutory holiday entitlement.
• Contractual benefits due up to termination.
• Statutory redundancy pay, where eligible.
• Any enhanced redundancy payment provided by the employment contract or relevant agreement.

Statutory redundancy notice periods follow the general framework in section 86 of the Employment Rights Act 1996.

An employee with at least one month but less than two years of service is generally entitled to one week’s notice.

For employees with two or more years of service, the minimum is one week for every complete year, up to a maximum of twelve weeks.

Contractual notice may provide greater protection.

Redundancy pay and notice pay are separate entitlements. Receiving statutory redundancy pay does not replace the obligation to provide the appropriate notice or payment in lieu.

11. Remedies for Unfair Dismissal and Redundancy Disputes

Employees who believe that they have been unfairly dismissed or denied their redundancy rights may seek remedies through the employment tribunal.

The available remedy depends on the legal basis of the claim.

11.1 Reinstatement

Reinstatement means restoring the employee to their former position as though they had not been dismissed.

The employer must treat the employee as having continued in employment, subject to the statutory requirements governing reinstatement.

It is the remedy that most directly restores the original employment relationship.

However, reinstatement is relatively uncommon because it may be impractical where the relationship has deteriorated or the organisational circumstances have changed.

11.2 Re-engagement

Re-engagement involves offering the employee employment in another position with the same employer or an associated employer.

The tribunal may specify the terms of the new employment and the date on which it should begin.

The purpose is to restore the employee to employment without necessarily returning them to the identical position.

11.3 Compensation

Where reinstatement or re-engagement is not ordered or is not appropriate, the tribunal may award compensation.

The traditional structure includes:

Basic award. This is calculated using a statutory formula based on age, completed years of service and weekly pay, subject to statutory limits.

Compensatory award. This addresses financial loss attributable to the unfair dismissal, subject to the applicable statutory framework and the requirement that the loss be attributable to the dismissal.

Compensation may take account of lost earnings, pension benefits and other relevant financial consequences.

The employee is generally expected to take reasonable steps to mitigate their loss, for example by seeking alternative employment.

The tribunal may also consider whether the employee’s conduct contributed to the dismissal or whether the employer can demonstrate that the same dismissal would have occurred even if a fair procedure had been followed.

The statutory rules governing deductions and adjustments can therefore materially affect the final award.

11.4 Compensation for Wrongful Dismissal

Wrongful dismissal is different because the remedy is contractual damages rather than the statutory compensation available for unfair dismissal.

The usual measure is the value of the contractual remuneration and benefits lost during the relevant notice period.

A person may bring both unfair dismissal and wrongful dismissal claims where the facts support both causes of action.

However, compensation must not duplicate the same financial loss.

11.5 Compensation for Redundancy Rights

Employees may also bring claims concerning unpaid statutory redundancy payments, unlawful deductions, failure to consult and other breaches of statutory obligations.

Where collective consultation requirements have been breached, a protective award may be available.

The different remedies address different legal wrongs and should not be treated as interchangeable.

12. Time Limits and Employment Tribunal Proceedings

Employment claims are subject to strict limitation periods.

Traditionally, most unfair dismissal claims had to be brought within three months less one day from the effective date of termination, subject to the statutory early conciliation rules.

However, the Employment Rights Act 2025 introduced an important procedural reform.

From 1 October 2026, the limitation period for most employment tribunal claims, including ordinary unfair dismissal claims, has been extended to six months less one day.

This change applies to the relevant claims in England and Wales, although individual statutory claims may have different limitation rules.

Employees should not assume that every employment-related claim automatically has the same deadline.

Wrongful dismissal claims brought in the employment tribunal and contractual claims brought in the civil courts are subject to different limitation frameworks.

12.1 ACAS Early Conciliation

Before bringing most employment tribunal claims, an employee must notify ACAS and engage with the early conciliation process, unless an applicable exemption applies.

ACAS provides an opportunity for the parties to resolve the dispute without a tribunal hearing.

If conciliation does not result in settlement, ACAS issues an early conciliation certificate.

The applicable limitation calculation takes account of the statutory early conciliation provisions.

12.2 Settlement Agreements

Employers and employees may resolve dismissal disputes through settlement agreements.

A settlement agreement is a legally binding agreement under which an employee may waive specified employment claims in return for agreed consideration.

For a settlement agreement to validly waive relevant statutory claims, the statutory requirements must be satisfied.

These include the requirement for the employee to receive advice from an appropriately qualified independent adviser concerning the terms and effect of the agreement.

The agreement should identify the particular claims being settled and satisfy the applicable legislative conditions.

A settlement agreement can provide certainty for both parties and avoid the cost and uncertainty of litigation.

13. The Employment Rights Act 2025: Upcoming and Recent Reforms

The Employment Rights Act 2025 represents a significant reform of employment protection in Great Britain, including England and Wales.

Several changes are particularly relevant to dismissal and redundancy law.

13.1 Reduction of the Unfair Dismissal Qualifying Period

From 1 January 2027, the ordinary qualifying period for bringing an unfair dismissal claim will be reduced from two years to six months.

This is a substantial change to section 108 of the Employment Rights Act 1996.

Employees dismissed before that date remain subject to the existing two-year qualifying period for ordinary unfair dismissal claims, unless an exception applies.

The reform does not remove the distinction between ordinary and automatically unfair dismissal. Protection against specified automatically unfair reasons continues to apply without the ordinary qualifying period.

13.2 Removal of the Compensatory Award Cap

From 1 January 2027, the statutory cap on compensatory awards for unfair dismissal will be removed.

Under the previous framework, compensatory awards were subject to a statutory maximum, in addition to the requirement to establish financial loss attributable to dismissal.

Removing this cap will potentially increase the compensation available in cases involving substantial financial losses.

The basic award will remain governed by its separate statutory calculation.

13.3 Collective Redundancy Protection

The Employment Rights Act 2025 also strengthens the consequences of failing to comply with collective consultation requirements.

From 6 April 2026, the maximum protective award for failure to comply with collective consultation obligations increased to 180 days’ pay.

This change substantially increases the potential financial consequences of procedural non-compliance.

13.4 Implications for Employers and Employees

These reforms require employers to review their dismissal procedures, probationary arrangements, redundancy policies and internal employment documentation.

Employees benefit from an expanded period of statutory protection, particularly those with relatively short periods of service.

The changes also reinforce the importance of fair procedures and proper consultation.

The reform should not be interpreted as preventing employers from dismissing employees for legitimate reasons. Rather, it changes the minimum statutory protection and the financial consequences of unlawful dismissal.

Key Takeaways

1. Unfair dismissal is governed principally by sections 94–98 of the Employment Rights Act 1996.
2. The employer must establish a potentially fair reason for dismissal and demonstrate that the decision was reasonable in the circumstances.
3. The five principal categories of potentially fair dismissal are capability, conduct, redundancy, illegality and some other substantial reason.
4. Certain dismissals are automatically unfair, particularly those connected with pregnancy, protected disclosures, trade union activities and the exercise of statutory employment rights.
5. Constructive dismissal occurs when an employee resigns in response to a fundamental contractual breach by the employer.
6. Wrongful dismissal is a contractual claim, most commonly involving failure to provide the required notice or payment in lieu.
7. A genuine redundancy situation must satisfy the statutory definition in section 139 of the Employment Rights Act 1996.
8. Redundancy selection must be reasonable, supported by appropriate criteria and free from unlawful discrimination.
9. Individual consultation is an important element of a fair redundancy process. Collective consultation is legally required when 20 or more redundancies are proposed at one establishment within 90 days.
10. From 6 April 2026, the maximum protective award for failure to comply with collective consultation requirements increased to 180 days’ pay.
11. Qualifying employees generally receive statutory redundancy pay after two years of continuous employment, calculated according to age, service and capped weekly earnings.
12. Suitable alternative employment, including the statutory four-week trial period, is an important element of redundancy protection.
13. From 1 January 2027, the ordinary unfair dismissal qualifying period will be reduced from two years to six months.
14. The compensatory award cap for unfair dismissal will also be removed from 1 January 2027.
15. Employment tribunal claims are subject to strict limitation periods and generally require ACAS early conciliation before proceedings are issued.

Frequently Asked Questions (FAQs)

1. What is the difference between unfair dismissal and wrongful dismissal?

Unfair dismissal is a statutory employment claim concerning the reason for dismissal and the fairness of the employer’s decision and procedure. Wrongful dismissal is a contractual claim arising when an employer breaches the employment contract, most commonly by failing to provide the required notice or payment in lieu.

2. How long must an employee work before claiming unfair dismissal in England and Wales?

For ordinary unfair dismissal claims, the qualifying period remains two years for dismissals before 1 January 2027. From that date, it will be reduced to six months. Certain automatically unfair dismissal claims do not require a qualifying period.

3. Can an employee be dismissed without notice?

Yes, in circumstances involving sufficiently serious misconduct amounting to a repudiatory breach of contract. This is commonly known as summary dismissal. However, the employer must still consider whether the dismissal is fair under employment legislation and follow an appropriate procedure.

4. What is constructive dismissal?

Constructive dismissal occurs when an employee resigns because the employer has committed a fundamental breach of the employment contract. The employee must generally demonstrate that the breach was sufficiently serious to justify terminating the contract without notice.

5. Is redundancy automatically a fair reason for dismissal?

No. Redundancy is a potentially fair reason, but the employer must establish a genuine redundancy situation and follow a fair selection and consultation process. Failure to do so may result in an unfair dismissal claim.

6. How many employees must be made redundant before collective consultation becomes compulsory?

Collective consultation is generally required when an employer proposes to dismiss 20 or more employees as redundant at one establishment within a period of 90 days or less.

7. How long must collective redundancy consultation last?

The statutory minimum is 30 days before the first dismissal takes effect where 20–99 redundancies are proposed, and 45 days where 100 or more are proposed.

8. What happens if an employer fails to consult employees before making redundancies?

The employer may face unfair dismissal claims and, where collective consultation was legally required, a protective award. From April 2026, the maximum protective award is 180 days’ full pay for each affected employee.

9. Who qualifies for statutory redundancy pay?

Employees generally need at least two years of continuous employment with their employer and must satisfy the statutory conditions for redundancy payment entitlement.

10. How is statutory redundancy pay calculated?

The calculation depends on the employee’s age and completed years of service. It provides half a week’s pay for each year under 22, one week’s pay for each year between 22 and 40, and one and a half weeks’ pay for each year aged 41 or above. Service is capped at 20 years, and weekly earnings are subject to a statutory maximum.

11. Must an employer offer another job before making an employee redundant?

An employer must consider suitable alternative employment where available. Certain employees, particularly those benefiting from statutory pregnancy and family-leave protections, have additional priority rights to suitable alternative vacancies.

12. What is the four-week redundancy trial period?

It is a statutory period during which an employee can assess whether an alternative position offered by the employer is suitable. A longer period may be agreed in writing where retraining is necessary.

13. Can an employee claim both unfair dismissal and wrongful dismissal?

Yes, where the circumstances support both claims. For example, an employer may dismiss an employee for an unfair reason and also fail to provide the contractual notice period. However, compensation cannot duplicate the same financial loss.

14. Can an employee claim unfair dismissal without two years of service?

Yes, where the claim concerns an automatically unfair reason or another statutory exception to the qualifying requirement. From 1 January 2027, the ordinary qualifying period will also be reduced to six months.

15. What is the time limit for bringing an unfair dismissal claim?

From 1 October 2026, the general limitation period for most employment tribunal claims, including unfair dismissal, is six months less one day, subject to the statutory early conciliation provisions and the particular rules governing the claim.

16. Can an employer dismiss an employee because of a protected characteristic?

No. Dismissal because of a protected characteristic under the Equality Act 2010 may constitute unlawful discrimination. Such claims do not require the ordinary two-year unfair dismissal qualifying period.

Conclusion

Unfair dismissal, wrongful dismissal and redundancy rights form three distinct but interconnected elements of employment law in England and Wales.

Unfair dismissal regulates the substantive and procedural legitimacy of an employer’s decision to terminate employment. Wrongful dismissal protects the contractual rights of employees, particularly their entitlement to notice and contractual remuneration. Redundancy law regulates the circumstances in which an employer may lawfully reduce its workforce and establishes additional obligations concerning consultation, selection, redeployment and financial compensation.

The distinction between these areas is fundamental. A dismissal may satisfy the contractual requirements for termination while violating statutory protections, or it may be substantively justified but procedurally unfair. Similarly, a genuine redundancy situation does not exempt an employer from consultation requirements or the obligation to apply fair selection criteria.

The Employment Rights Act 2025 introduces further changes to this framework, particularly through the forthcoming reduction of the ordinary unfair dismissal qualifying period and removal of the compensatory award cap in January 2027.

Taken together, the statutory framework seeks to balance the legitimate operational needs of employers with the protection of employees against arbitrary, discriminatory or procedurally defective termination of employment.

Understanding these distinctions is essential not only for employers and human resources professionals but also for employees, legal practitioners and anyone examining the relationship between contractual freedom, statutory protection and fairness in the modern workplace.

Principal legislation and further reading

The following primary legislation and official sources provide the foundation for this article:

Primary legislation

1. Employment Rights Act 1996 – Part X: Unfair Dismissal
2. Employment Rights Act 1996 – Section 86: Minimum Notice
3. Employment Rights Act 1996 – Section 139: Redundancy
4. Employment Rights Act 1996 – Part XI: Redundancy Payments
5. Trade Union and Labour Relations (Consolidation) Act 1992
6. Equality Act 2010
7. Employment Relations Act 1999
8. Employment Rights Act 2025

Official guidance

• ACAS – Unfair dismissal
• ACAS – Redundancy consultation
• GOV.UK – Redundancy rights and payments
• GOV.UK – Employment Rights Act 2025 reforms

Leading judicial authorities

• British Home Stores Ltd v Burchell [1980] ICR 303 – reasonable investigation and belief in misconduct.
• Polkey v AE Dayton Services Ltd [1987] UKHL 8 – procedural unfairness and the assessment of compensation.
• Western Excavating (ECC) Ltd v Sharp [1978] QB 761 – fundamental contractual breach and constructive dismissal.
• Omilaju v Waltham Forest London Borough Council [2005] EWCA Civ 1493 – the last straw principle.
• Williams v Compair Maxam Ltd [1982] ICR 156 – fairness in redundancy selection and consultation.

Jurisdictional note: This article addresses employment law in England and Wales. The principal legislation discussed generally extends across Great Britain, including Scotland, but not Northern Ireland, which has a separate employment-law framework. Legislative position stated as at 31 October 2026.