Getting a dismissal wrong is expensive. Not just in legal fees and compensation, but in management time, team morale, and the distraction it causes to your business. Employment tribunal claims are up, the qualifying period for unfair dismissal is changing, and a poorly handled disciplinary process can turn what should have been a straightforward exit into a drawn-out dispute that costs tens of thousands of pounds.
The numbers are sobering. In 2024/25, the median compensatory award for unfair dismissal at tribunal was around £12,000 but that's the median. Awards at the higher end, particularly where discrimination is involved, can dwarf that figure. Add legal costs, management time, and the reputational fallout from a public tribunal decision, and the true cost of getting it wrong is considerably higher.
The good news is that most tribunal claims are avoidable. The vast majority of unfair dismissal findings come down not to employers making the wrong decision, but to employers making the right decision in the wrong way. Follow a fair process, document it properly, and you dramatically reduce your exposure.
The Cost of Getting Dismissals Wrong
• Basic award: up to £21,000 (2026 cap, based on age and length of service)
• Compensatory award: up to £115,115 or 52 weeks' pay, whichever is lower
• Week's pay cap: £700 (April 2026)
• ACAS uplift of up to 25% on top of any award if you fail to follow the Code
• Legal fees, management time, and reputational damage are uncapped
Tribunal decisions are public. They appear on the government's online tribunal decisions database and are regularly picked up by HR and employment law publications. A finding of unfair dismissal, particularly for procedural failures — is not a good look for any business. Prospective employees, clients, and commercial partners may come across it. Prevention is always better than cure.
The ACAS Code of Practice on Disciplinary and Grievance Procedures is the cornerstone of any fair disciplinary process. Issued under section 199 of the Trade Union and Labour Relations (Consolidation) Act 1992, the Code doesn't carry the force of law on its own but employment tribunals are required to take it into account when deciding whether an employer acted fairly. Departing from it without good reason is a significant risk.
The 25% uplift is the provision that concentrates minds. Under section 207A of the 1992 Act, if a tribunal finds that an employer has unreasonably failed to follow the Code, it can increase any award by up to 25%. On a £50,000 award, that's an extra £12,500. On a maximum compensatory award, it could add over £28,000. The uplift applies to unfair dismissal, breach of contract, and certain discrimination claims.
What the ACAS Code Requires
• Carry out a reasonable investigation before taking any disciplinary action
• Inform the employee of the problem in writing before any hearing
• Hold a disciplinary meeting and allow the employee to put their case
• Allow the employee to be accompanied by a trade union rep or work colleague
• Give the employee a right of appeal against any disciplinary outcome
• Act without unreasonable delay at each stage
The Code sets out minimum requirements, not a rigid script. Small businesses sometimes worry that they don't have formal HR procedures in place. That's fine — what matters is that you follow the principles.
An investigation doesn't have to be conducted by an HR director; a disciplinary hearing doesn't need to be in a boardroom. The substance is what counts.
Where employers most commonly fall foul of the Code is in skipping the investigation, failing to give enough notice of the hearing, or simply rushing the process because they want the employee out quickly. These shortcuts rarely save time in the long run.
The Code Does NOT Apply To…
• Redundancy dismissals — these follow a separate process
• Non-renewal of fixed-term contracts (though fair process is still important)
• Retirement — handled under separate age discrimination rules
Not all dismissals are the same, and the appropriate procedure depends on the reason for dismissal. Under section 98 of the Employment Rights Act 1996, a dismissal will only be potentially fair if it falls within one of the recognised statutory reasons. Getting the reason right matters - a tribunal will scrutinise whether the reason given was the genuine reason, and whether the procedure matched it.
| Reason | Typical Examples | Key Considerations |
| Misconduct | Persistent lateness, dishonesty, breach of policy, bullying | Requires investigation, warning system usually applies |
| Gross Misconduct | Theft, violence, serious insubordination, serious data breach |
Can justify summary dismissal; still needs fair process |
| Capability (Performance) |
Failure to meet performance standards, inability to do the job |
Support, targets, and a review period are usually required first |
| Capability (Ill Health) |
Long-term or frequent short-term absence | Medical evidence, occupational health, and phased return explored |
| Some Other Substantial Reason (SOSR) |
Business reorganisation, breakdown of trust, third-party pressure |
Facts must genuinely justify the reason; broad but not a catch-all |
| Redundancy | Role no longer needed, business closure, reduced headcount | Separate consultation obligations; selection criteria must be fair |
This guide focuses primarily on misconduct and gross misconduct, which account for the bulk of disciplinary cases. Capability, ill health, and redundancy procedures are covered in separate guides in this series.
A fair disciplinary process has four core stages: investigation, hearing, outcome, and appeal. Miss one of them or rush through it and you hand the employee a significant procedural argument at tribunal.
The good news is that none of this is particularly complicated. It just requires discipline (in the non-HR sense) and a bit of planning.
Before you can hold a disciplinary hearing, you need to know what actually happened. The investigation is your fact-finding exercise. It's separate from the disciplinary hearing itself — the person who conducts the investigation should ideally not be the same person who chairs the hearing, though in small businesses this isn't always practical.
Gather documentary evidence (CCTV, emails, timesheets, records), take statements from witnesses where relevant, and give the employee a chance to respond to the allegations before a hearing is convened. The depth of investigation should be proportionate to the seriousness of the allegation. A persistent lateness issue needs less investigation than an allegation of fraud.
Investigation Tips
• Keep a written record of every step, who you spoke to, what was said, and when
• Don't prejudge the outcome; investigate with an open mind
• Suspension during investigation is sometimes appropriate but should not be automatic or punitive
• Suspension should be on full pay unless your contract explicitly provides otherwise
• Complete the investigation promptly — delays can be used against you
Before the hearing, write to the employee setting out the allegations clearly, enclosing copies of the evidence you intend to rely on, and giving them reasonable notice of the hearing date. "Reasonable" in practice means at least 48 hours, though a few days is better. The letter should also remind them of their right to be accompanied.
At the hearing itself, explain the allegations, go through the evidence, and give the employee a full opportunity to respond — to offer their explanation, call their own witnesses if appropriate, and put forward any mitigating factors. Don't talk over them. Don't make your mind up before you've heard them out. After the hearing, adjourn to consider the outcome rather than announcing it on the spot.
The Right to Be Accompanied
Under section 10 of the Employment Relations Act 1999, any worker has the right to be accompanied at a disciplinary or grievance hearing by a trade union representative or a fellow worker. This right cannot be contracted out of. Denying it or failing to mention it in your invitation letter is a procedural failure that will be noted by a tribunal. The companion can address the hearing and confer with the employee, but cannot answer questions on the employee's behalf.
After the hearing, take time to consider what you've heard before reaching a decision. The outcome should be communicated in writing, clearly explaining the finding, the reason for any sanction, and the right of appeal. If you're issuing a warning, state how long it will remain on the employee's record. If you're dismissing, make the effective date clear and confirm any notice entitlement or payment in lieu.
Every disciplinary outcome must carry a right of appeal. This isn't optional, it's required by the ACAS Code. The appeal should be heard by someone senior to or at least independent from the person who made the original decision. In a small business where that isn't possible, document the constraints and do the best you can.
An appeal is not simply a repeat of the original hearing. It's a review of whether the process was fair and whether the outcome was reasonable. The employee may raise new points or new evidence if they do, consider them properly. The outcome of the appeal (uphold, vary, or overturn) should also be confirmed in writing without unreasonable delay.
A structured warning system gives employees a fair chance to improve their conduct before more serious action is taken. Most disciplinary procedures follow a three-stage warning process, though the stages can be compressed where the seriousness of the conduct warrants it.
| Warning Type | Typical Duration | When to Use |
| Verbal Warning (First written in some policies) | 3–6 months | Minor misconduct, first offence; e.g. occasional lateness, minor policy breach |
| First Written Warning | 6–12 months | Repeated minor misconduct or moderately serious single incident |
| Final Written Warning | 12 months (sometimes longer for serious matters) |
Further misconduct while a warning is live; or serious (but not gross) misconduct |
| Dismissal | N/A | Continued misconduct after final written warning, or gross misconduct |
The durations in the table above are guidelines. Your disciplinary policy may specify different periods and if it does, follow them consistently. What matters is that the duration is proportionate to the seriousness of the conduct.
Once a warning has expired, it should not ordinarily be taken into account when deciding on a further sanction. That said, it can sometimes be relevant as background context for instance, to show a pattern of behaviour but be cautious about placing too much weight on it. Tribunals look carefully at whether expired warnings are being used to "stack the deck" against an employee.
You don't always have to start at the bottom. If the conduct is sufficiently serious, you can jump straight to a final written warning without going through verbal and first written stages first. A serious breach of health and safety policy that didn't quite reach the threshold of gross misconduct, for instance, might justify going straight to a final written warning. Document your reasoning clearly when you do this.
What a Written Warning Must Include:
• A clear description of the conduct or performance issue
• The improvement or change of behaviour required
• How long the warning will remain on the employee's record
• The likely consequence of further misconduct (e.g. dismissal)
• The employee's right to appeal the warning
Gross misconduct is conduct so serious that it fundamentally destroys the employment relationship and justifies immediate dismissal without notice — so-called "summary dismissal". Done properly, it is entirely lawful. Done badly, it is one of the most common sources of successful unfair dismissal claims.
Your employment contract or disciplinary policy should contain a non-exhaustive list of examples of gross misconduct. The key word is non-exhaustive you can't anticipate every situation, and a tribunal won't expect you to. What matters is that the conduct was so serious that dismissal falls within the range of reasonable responses open to a reasonable employer.
| Category | Examples |
| Dishonesty | Theft, fraud, falsifying records, claiming pay for hours not worked |
| Violence or threatening behaviour | Physical assault, intimidation, threats against colleagues or customers |
| Serious health & safety breaches | Deliberately ignoring safety rules in a way that endangers others |
| Serious insubordination | Refusing a direct, reasonable management instruction without justification |
| Data and confidentiality breaches | Deliberately sharing confidential data, serious GDPR breaches |
| Discrimination or harassment | Serious harassment, racial or sexual abuse, bullying of a protected characteristic |
| Being under the influence | Coming to work drunk or under the influence of drugs where safety is a concern |
Summary dismissal does not mean instant dismissal without any process. This is the most common mistake employers make. "Summary" refers to the lack of notice — not the lack of procedure. You must still investigate, hold a hearing, give the employee the chance to respond, and offer a right of appeal. The only thing you don't have to give is notice pay (or pay in lieu of notice).
Critical Mistake: Dismissing Without a Hearing
Telling an employee they are dismissed for gross misconduct without holding a disciplinary hearing is almost always unfair, even where the conduct is obvious and undeniable. A tribunal will not accept "we knew what he did" as a substitute for process. Even where you have CCTV footage, a confession, or multiple witnesses, you still need to go through the formal steps.
Aside from failing to hold a hearing, employers commonly stumble in gross misconduct cases by:
• Conducting a superficial investigation. The more serious the allegation, the more thorough the investigation needs to be. Don't just take the word of one witness without corroborating it.
• Treating it as a foregone conclusion. Even if you're confident the employee did what is alleged, they must have a genuine opportunity to put their side. If you've already made your mind up before the hearing, the process is a sham and a tribunal will see through it.
• Inconsistent treatment. If one employee is dismissed for something another employee was only warned for, be ready to explain why. Different facts can justify different outcomes, but you need to be able to articulate the difference.
• Forgetting about statutory notice. Employees with two or more years' service who are dismissed for gross misconduct do not receive contractual notice, but they are entitled to a basic award at tribunal if the dismissal is found to be unfair. Don't confuse the two.
The right not to be unfairly dismissed is one of the most fundamental protections in UK employment law, found in Part X of the Employment Rights Act 1996. If an employee brings a successful claim, a tribunal can order reinstatement, re-engagement, or — most commonly — compensation.
Historically, employees needed two years' continuous service to claim unfair dismissal. The Employment Rights Act 2025 — one of the most significant reforms to employment law in a generation, is in the process of reducing this qualifying period to six months. Once fully in force, this change will dramatically increase the pool of potential claimants. Employers who have relied on the two-year period as a safety net need to start following proper disciplinary procedures from day one.
Qualifying Period — Transitional Position (2026)
The Employment Rights Act 2025 received Royal Assent in July 2025. The reduction of the qualifying period from two years to six months will be implemented by secondary legislation. You should check the current commencement position but plan now as if it applies, because the direction of travel is clear. Some protections (e.g. automatically unfair dismissals for whistleblowing, trade union activities, and pregnancy) carry no qualifying period at all.
A tribunal assessing an unfair dismissal claim asks two core questions: was there a potentially fair reason for dismissal? And if so, did the employer act reasonably in treating that reason as sufficient cause for dismissal, having regard to equity and the substantial merits of the case? (Section 98(4), Employment Rights Act 1996.)
Reasonableness is assessed objectively — not whether the tribunal would have dismissed, but whether dismissal fell within the range of reasonable responses open to a reasonable employer in those circumstances. This is a relatively employer-friendly test, but it doesn't protect employers who have followed a manifestly inadequate process.
In misconduct cases, the leading authority remains British Home Stores Ltd v Burchell [1980] ICR 303. The "Burchell test" requires that, at the time of dismissal, the employer:
1. Had a genuine belief that the employee was guilty of the misconduct alleged;
2. Had reasonable grounds for that belief; and
3. Had carried out a reasonable investigation before forming that belief.
Note that the test does not require proof beyond reasonable doubt or even on the balance of probabilities in the strict civil sense. You need a genuine, reasonably grounded belief, reached after a reasonable investigation. That said, a thin or one-sided investigation will undermine even a genuine belief.
Compensation: How Do Tribunals Calculate Awards
• Basic award: calculated like statutory redundancy pay — age, weekly pay (capped at £700), and years of service
• Compensatory award: loss of earnings, loss of pension contributions, loss of future earnings
• Compensatory award capped at the lower of £115,115 or 52 weeks' gross pay (2026)
• Tribunal can reduce awards for contributory fault (employee's own conduct)
• Polkey reduction: award may be reduced where a fair procedure would have made no difference
• ACAS uplift of up to 25% if employer unreasonably fails to follow the Code
Most tribunal losses are avoidable. After years of supporting employers through disciplinary processes and defending claims at tribunal, certain patterns emerge. Here are the mistakes that keep coming up and how to avoid them.
An investigation that speaks only to the manager who raised the issue, or that accepts one person's account without testing it, is not a reasonable investigation. Gather the evidence. Speak to independent witnesses. Give the accused employee a chance to comment before the hearing, not just during it. The strength of your investigation is the foundation of everything that follows.
"We already know what he did, we just need to go through the motions" is one of the most dangerous approaches an employer can take. If the decision-maker had already made up their mind before the hearing, the process is worthless. Tribunals are very good at spotting this — letters written in advance, outcomes announced without a proper adjournment, or witnesses who describe the outcome as "never in doubt".
Failing to inform an employee of their right to be accompanied, or refusing a reasonable request to postpone the hearing so that the employee can arrange accompaniment, is a breach of the Employment
Relations Act 1999. It also leads to the ACAS Code's procedural requirements being unmet. Make it explicit in every invitation letter.
If two employees do broadly the same thing and one is dismissed while the other gets a warning, you need a defensible explanation. Seniority of role, length of service, and the nature of the specific conduct can all justify different outcomes but "we just didn't like him as much" is not an explanation a tribunal will accept. Keep records of how you've handled previous cases so you can demonstrate consistency.
If it isn't written down, it didn't happen — at least as far as a tribunal is concerned. Minutes of
disciplinary hearings, investigation reports, outcome letters, appeal notes: all of it should be documented and retained. You don't need a transcript, but you do need a contemporaneous record of what was discussed, what the employee said, and how you reached your decision.
In capability and some misconduct cases, tribunals expect to see evidence that you considered alternatives to dismissal — demotion, transfer to another role, a final written warning, retraining. You don't have to take those options, but you need to show you considered them. Jumping straight to dismissal without considering alternatives can push a decision outside the range of reasonable responses.
The Constructive Dismissal Risk
Constructive dismissal is where an employee resigns in response to a serious breach of contract by the employer — and then claims they were effectively dismissed. It can arise from a disciplinary process where the employer's conduct has been so unreasonable that it amounts to a fundamental breach of the implied term of mutual trust and confidence. Humiliating an employee in front of colleagues, making baseless allegations, or conducting a sham process can all give rise to this risk.
The compensation rules are broadly the same as for unfair dismissal.
| Step | Done? | Notes |
| Identified the reason for dismissal and confirmed it is a potentially fair statutory reason |
ERA 1996, s.98 | |
| Conducted a thorough, documented investigation | Proportionate to the seriousness of the issue |
|
| Written to the employee setting out the allegations and evidence | Reasonable notice of hearing |
|
| Included right to be accompanied in hearing invitation | Employment Relations Act 1999, s.10 |
|
| Held the hearing and allowed employee to respond fully |
Adjourned before deciding outcome |
|
| Considered alternatives to dismissal (where relevant) | Document consideration even if not adopted |
|
| Communicated outcome in writing with reasons | Include effective date of dismissal |
|
| Offered right of appeal, and heard it if exercised | Independent chair if possible |
|
| Retained full documentation | Minimum 6 years recommended |
This checklist is a starting point, not a comprehensive legal audit. The specific facts of every case will dictate what additional steps may be required. If you are in any doubt - particularly before dismissing - seek legal advice first.
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