The Ultimate Guide to Unfair Dismissal for UK Employers

Let’s face it, dismissing an employee is one of the trickiest parts of running a business. It’s not just about letting someone go; it’s about doing it in a way that’s fair, lawful, and avoids landing you in an employment tribunal.

Unfair dismissal claims are one of the most common types of legal actions employees bring against employers. In fact, thousands of claims are filed every year, and a surprising number of them succeed simply because the employer didn’t follow the proper tribunal procedure - not necessarily because the dismissal itself was unjustified.

This guide is designed to walk you through everything you need to know about unfair dismissal in the UK. Whether you’re considering letting someone go, already in the process, or just want to be proactive, this is your go-to resource.

What is Unfair Dismissal?

Unfair dismissal happens when an employee is terminated from their job and either:

• the reason for dismissal wasn’t fair, or
• the employer didn’t follow a fair process.

The legal basis for unfair dismissal comes from the Employment Rights Act 1996, which lays out when and how an employee can be dismissed lawfully.

Not all dismissals are unfair – it all depends on whether you are able to justify both the reason for dismissal and the procedure you followed when dismissing them. Get either one wrong and you might be in trouble.

Who Can Claim Unfair Dismissal?

Before diving into what counts as unfair, let’s clarify who can actually bring a claim.

The current eligibility criteria are:

• the employee must usually have at least two years of continuous service;
• they must be legally classed as an employee (not a contractor, freelancer, etc.); and
• they must bring the claim within 3 months less 1 day from their termination date.

You should note, however, that these criteria are expected to change in 2026 – with the ‘continuous service’ element looking likely to be removed for the most part. This will result in the right to bring a claim for unfair dismissal becoming a ‘day one’ right’. We do not yet know what exceptions there will be to this proposal yet as the new Employment Rights Bill is still being debated in Parliament, and we will update on this more as the bill progresses.

Exceptions where no minimum service is required:

Some dismissals are automatically unfair, meaning employees can claim even if they’ve been with you for less than two years.

Examples include being dismissed for:

• being pregnant or on maternity leave;
• whistleblowing;
• raising health and safety concerns;
• joining or refusing to join a trade union;
• requesting flexible working; and
• taking time off for jury duty.

Fair Reasons for Dismissal

The law recognises five potentially fair reasons for dismissing an employee:

1. Conduct – this includes things like theft, dishonesty, insubordination, repeated lateness, or breach of company policies.
2. Capability or Qualifications – if the employee can’t do their job because of a lack of skills, qualifications, or long-term illness, dismissal may be fair.
3. Redundancy – if the role is no longer needed, or the business is restructuring or downsizing, redundancy is a fair reason.
4. Statutory Illegality – if continuing the employment would break the law - for example, a driver losing their licence — this is valid.
5. Some Other Substantial Reason (SOSR) – this is a bit of a catch-all. Examples include a breakdown in trust or a third party demanding the employee be removed.

You should be aware though that having a fair reason isn’t enough on its own – you also need to follow the right process.

What is a Fair Procedure?

A common mistake employers make is assuming that a fair reason alone will protect them, but the procedure matters just as much.

Here’s what a fair dismissal process generally looks like:

1. Investigate – gather facts, speak to witnesses, and document everything. Don’t jump to conclusions.
2. Inform the Employee – clearly outline the allegations or reasons for potential dismissal. Provide evidence and allow them to prepare.
3. Hold a Disciplinary Hearing – give the employee a chance to explain their side. They have a legal right to bring a colleague or trade union representative.
4. Make a Reasoned Decision – base your decision on the evidence. Don’t let bias or assumptions drive the outcome.
5. Offer a Right to Appeal – This is essential! If you skip the appeal process, you risk the dismissal being deemed unfair — even if everything else was by the book.

Common Mistakes Employers Make

Even with good intentions, many employers fall into these traps:

• firing on the spot without investigation (especially in conduct cases);
• not keeping proper documentation;
• missing key procedural steps (like not offering an appeal);
• treating employees inconsistently (disciplining some but not others for the same issue); and
• ignoring potential alternatives like redeployment and retraining.

What Happens if a Dismissal is Deemed Unfair?

If a tribunal finds that the dismissal was unfair, the employee could be awarded:

• Reinstatement – they return to their old job;
• Re-engagement – they return to a different role; and/or
• Compensation – see below.

Compensation includes:

• Basic Award – an award based on the claimant’s age, length of service, and weekly pay (similar to redundancy pay); and
• Compensatory Award – which covers actual losses (e.g., lost wages, benefits)

In 2023/24, the average compensation for unfair dismissal was around £13,749 with some awards going much higher - even up to £179,124 in extreme cases.

How to Protect your Business from a Claim

Here are practical steps to reduce your risk:

• Keep up-to-date contracts and policies – clear disciplinary and grievance policies help manage expectations and protect you legally.
• Train your managers – make sure anyone with dismissal power understands how to handle it properly.
• Document everything – from informal warnings to full investigations, maintain a paper trail.
• Use settlement agreements where appropriate – these can provide a clean break with legal protection - if handled carefully.
• Seek legal advice – when in doubt, get professional help. The cost of a consultation is minor compared to a tribunal claim.

Key Things to Take Away

Unfair dismissal isn’t just about whether you had a good reason to let someone go - it’s about whether you handled the situation fairly, respectfully and legally.

By following a fair process and understanding your obligations, you not only reduce the risk of tribunal claims you build a stronger, more trustworthy workplace.

As Unfair Dismissal is a legal minefield, and we would always advise that you seek professional legal advice to help ensure you are navigating the circumstances in the correct and legal way. The above is based on a general approach to unfair dismissal but every situation is different (trust us – we know)