How to dismiss an employee fairly: a guide for employers

The potentially fair reasons for dismissal

A dismissal is fair only if two things are true. First, the employer must show the reason, or the main reason, for the dismissal and that it is one of the reasons the Employment Rights Act 1996 recognises. Second, the employer must have acted reasonably in treating that reason as sufficient to dismiss, taking account of the size and administrative resources of the business. Section 98 of the Act sets out the potentially fair reasons:

• capability or qualifications, including skill, aptitude and health;
• conduct;
• redundancy;
• a statutory restriction, where the employee cannot continue in the job without breaking the law, for example a driver who loses their licence; and
• some other substantial reason that could justify dismissing someone in that role, for example ending a maternity cover contract where it was made clear at the start that the job was temporary.

The reason has to be the real one. If a tribunal decides that the stated reason was not the true reason, for example that a redundancy was used to remove someone the employer regarded as a poor performer, the dismissal is likely to be unfair.

There is no statutory definition of acting reasonably. Government guidance says a tribunal would consider whether the employer genuinely believed the reason was fair, carried out proper investigations where appropriate, followed the relevant procedures, told the employee why they were being considered for dismissal and listened to their views, allowed them to be accompanied at disciplinary or dismissal hearings, and gave them the chance to appeal. It may also consider whether the employee could have been expected to understand the consequences of their behaviour. In practice the procedure you follow carries a lot of weight, and a dismissal for a sound reason can still be unfair if it is handled badly.

Who can claim: the qualifying period and the 2027 change

At present, most employees need at least two years' continuous employment, ending with the effective date of termination, to bring an ordinary unfair dismissal claim. The effective date of termination is normally the date notice expires or, if no notice is given, the date the dismissal takes effect. If you dismiss without giving the statutory minimum notice, that notice period is added on when working out whether the employee has enough service.

Section 25 of the Employment Rights Act 2025 reduces the qualifying period to six months. The commencement regulations made on 26 May 2026 bring that change into force on 1 January 2027 and apply it wherever the effective date of termination falls on or after that date, even if the employee was dismissed or given notice before it. Employees who already have six months' service on 1 January 2027 are protected straight away. The same package reduces the qualifying period for requesting written reasons for dismissal from two years to six months, removes the qualifying period for dismissals connected with spent convictions, and removes the power to change the qualifying period by secondary legislation.

For example, say an employee started on 1 May 2026. If you give them one month's notice on 15 December 2026, their employment ends on 15 January 2027. Because the effective date of termination falls after 1 January 2027 and they will have more than six months' service by then, they can bring an ordinary unfair dismissal claim. If the same notice had ended on 20 December 2026, the two-year rule would have applied.

Some claims need no qualifying service at all. Dismissals for automatically unfair reasons are covered from the first day, and so are discrimination claims. The cap on the compensatory award is also removed for dismissals with an effective date of termination on or after 1 January 2027, so compensation for lost earnings will no longer be limited to £123,543 or a year's gross pay.

Following the Acas Code of Practice

For dismissals relating to conduct or performance, the Acas Code of Practice on disciplinary and grievance procedures sets out the basic steps tribunals expect. It does not apply to redundancy dismissals or to fixed-term contracts that are not renewed when they expire.

Investigate without unreasonable delay to establish the facts, and in misconduct cases use different people for the investigation and the disciplinary hearing where that is practicable. If suspension is needed, keep it as short as possible, keep it under review and make clear that it is not a disciplinary sanction. Unless the contract allows unpaid suspension, suspend on full pay. If there is a case to answer, write to the employee explaining the allegations or performance concerns and their possible consequences, enclose copies of the evidence, including any witness statements, and give the time and place of the hearing and their right to be accompanied.

At the hearing, go through the evidence and let the employee put their case, ask questions, present evidence and call relevant witnesses. Workers have a statutory right to be accompanied by a colleague or a trade union representative, and if the chosen companion cannot attend you must postpone to a reasonable time the worker proposes within five working days of the original date. Make the decision after the meeting and confirm it in writing. For misconduct or poor performance, a written warning is usual for a first issue, followed by a final written warning, although a serious first offence can justify going straight to a final warning. Tell the employee how long any warning will remain live and what will happen if there is no improvement.

A decision to dismiss should be taken by a manager with authority to do so, and the employee should be told the reasons, the termination date, their notice and their right of appeal. Hear any appeal without unreasonable delay, using a manager who has not been involved if possible, and confirm the result in writing. If the employee persistently fails to attend meetings without good reason, you can make a decision on the evidence available.

If a claim succeeds and the tribunal finds that you unreasonably failed to follow the Code, it can increase the award by up to 25%. Acas is consulting until 23 September 2026 on a draft updated Code that puts more weight on resolving concerns informally and early. Until a new Code is approved and takes effect, the 2015 Code applies.

Conduct, capability and ill health

In a conduct case, establish through a proper investigation what happened, and make sure that, on the evidence, you genuinely believe the employee did what is alleged. Act consistently: if others have been treated more leniently for similar conduct, be ready to explain why this case is different. Some acts are gross misconduct, so serious that they can justify dismissal without notice for a first offence. Your disciplinary rules should give examples, such as theft, fraud, physical violence, gross negligence or serious insubordination, but even then a fair procedure must be followed before dismissing.

A capability case is about whether the employee can do the job to the required standard. Set out clearly what is expected, explain where the employee falls short, offer support or training, give a realistic period to improve and review progress before moving to formal warnings. The basic principles of fairness in the Acas Code still apply if you use a separate capability procedure.

Where the problem is long-term ill health, dismissal should be a last resort. Consult the employee and get medical evidence, such as a report from their GP, which needs their permission and which they have the right to see before you do, or an occupational health assessment. Consider whether they are disabled under the Equality Act 2010 and what reasonable adjustments could help them return, including a different role. If no reasonable adjustment would allow them to do the job, dismissal can be fair even where the employee is disabled, but the risk of a discrimination claim makes a careful process important.

Reasons that are automatically unfair

Some reasons make a dismissal automatically unfair, whatever process was followed, and most of them need no qualifying service. They include dismissal because of pregnancy, maternity or other family leave such as paternity, adoption, parental or shared parental leave or time off for dependants; health and safety activities; whistleblowing; asserting a statutory right, such as the right to the minimum wage, working time protections, flexible working or automatic pension enrolment; acting as an employee representative, trade union representative or pension scheme trustee; trade union membership or activities; jury service; and being a part-time or fixed-term employee. Dismissal for taking part in lawfully organised industrial action is also automatically unfair, and since 18 February 2026 that protection is no longer limited to the first 12 weeks of the action.

Dismissals because of political opinions or affiliation, or membership of the reserve forces, need no qualifying service either, although they are not automatically unfair. From 1 January 2027, dismissals connected with a spent conviction will also need no qualifying period. The government's timeline says that from January 2027, dismissing an employee for refusing to agree to certain contract changes, such as cuts to pay or hours, will become automatically unfair in most cases.

Discrimination claims under the Equality Act 2010 need no qualifying service and there is no statutory cap on the compensation.

Notice, pay in lieu and wrongful dismissal

Unless you are dismissing for gross misconduct, the employee is entitled to notice. Once they have a month's service, the statutory minimum is one week until they have two years' service, then one week for each complete year up to 12 weeks, and the contract may give more. You can make a payment in lieu of notice if the contract allows it or the employee agrees. Pay in lieu of notice, and post-employment notice pay calculated under HMRC's formula where notice is not worked, is taxed as earnings with National Insurance.

A dismissal in breach of contract, for example without the notice the employee was entitled to, is a wrongful dismissal. That is a separate claim from unfair dismissal and does not depend on length of service. It can be brought in the employment tribunal, where awards for contract claims are limited to £25,000, or in the civil courts. Dismissing without notice for gross misconduct protects you against a wrongful dismissal claim only if the misconduct really was serious enough to justify it.

An employee with the qualifying service who asks for a written statement of the reasons for their dismissal must be given one within 14 days of the request. A woman dismissed while pregnant, or in circumstances where her maternity leave ends because of the dismissal, and an employee dismissed while on adoption leave, are entitled to written reasons without asking and whatever their length of service. Set out the reasons in the dismissal letter in any event.

What an unfair dismissal claim can cost

If a tribunal finds a dismissal unfair, it can order reinstatement or re-engagement, or award compensation. Compensation has two parts.

The basic award is calculated in the same way as statutory redundancy pay: half a week's pay for each full year of employment under the age of 22, one week's pay for each full year from 22 to 40, and one and a half weeks' pay for each full year from 41, counting back from the effective date of termination and up to 20 years. A week's pay is capped at £751 where the effective date of termination is on or after 6 April 2026, so the maximum basic award is £22,530. It can be reduced because of the employee's conduct before the dismissal, and it is reduced by any redundancy payment made.

The compensatory award is the amount the tribunal considers just and equitable to compensate for the loss the employee suffered because of the dismissal, including lost earnings and benefits and reasonable expenses. The employee must take reasonable steps to reduce their loss, such as looking for work, and the award is reduced if the employee's own actions contributed to the dismissal. Where the effective date of termination falls between 6 April 2026 and 31 December 2026, the compensatory award is capped at £123,543 or 52 weeks' gross pay, whichever is lower. For someone earning £40,000 a year, 52 weeks' gross pay is £40,000, so that is the most the compensatory award could be. There is no cap where the dismissal was for whistleblowing or for health and safety reasons, and for dismissals with an effective date of termination on or after 1 January 2027 the cap is removed altogether.

An award can be increased or reduced by up to 25% for an unreasonable failure to follow the Acas Code, and increased where the employer had not given the employee a written statement of employment particulars. Compensation for discrimination, including injury to feelings, has no statutory cap.

Time limits and early conciliation

Before bringing most tribunal claims, the employee must notify Acas, which offers early conciliation. Early conciliation can last up to 12 weeks, and the time limit for the claim is put on hold while it takes place. If the dispute is not resolved, Acas issues a certificate and the employee has at least one month from receiving it to bring the claim.

For unfair dismissal, the time limit is currently three months less one day from the effective date of termination. Where the effective date of termination falls on or after 1 October 2026, the limit is six months. An employee dismissed for certain reasons, including whistleblowing and trade union activities, can ask the tribunal for interim relief, which can continue their employment until the claim is decided, but they must apply within seven days of the dismissal.

A checklist before you dismiss

• Identify the real reason and which of the section 98 reasons it falls under.
• Check the employee's service against the date the employment will actually end, including the change on 1 January 2027.
• Look for anything that could make the dismissal automatically unfair or discriminatory, such as a recent complaint, pregnancy, family leave, sickness absence or a disclosure about wrongdoing.
• Follow your own procedure and the Acas Code, and keep a written record of each step.
• Consider whether a warning, an alternative role or an adjustment would be a reasonable alternative.
• Confirm the decision in writing with the reasons, the termination date, notice or pay in lieu, and the right of appeal.
• Calculate final pay correctly, including holiday pay and any post-employment notice pay.
• Consider whether a settlement agreement would give more certainty than a contested process.

We advise employers and HR advisers on conduct, capability and ill-health cases from the first concern to the appeal, and on responding to claims if they arise. We agree the scope and cost of the work in writing before we start. For redundancies, see our guide to running a fair redundancy process.

Frequently asked questions

Can I dismiss an employee with less than two years' service?

Yes, but check the dates carefully. At present most employees need two years' service to claim ordinary unfair dismissal, but where the effective date of termination is on or after 1 January 2027 they need only six months, even if notice was given before that date. Employees with any length of service can still bring a claim if the dismissal was for an automatically unfair reason, such as whistleblowing or pregnancy, or was discriminatory.

What changes to unfair dismissal law take effect on 1 January 2027?

Where the effective date of termination is on or after 1 January 2027, the qualifying period for ordinary unfair dismissal falls from two years to six months and the cap on the compensatory award is removed. Employees who already have six months' service on that date are protected straight away. The qualifying period for requesting written reasons for dismissal also falls to six months, and dismissals connected with spent convictions will need no qualifying period.

What is the maximum compensation for unfair dismissal in 2026?

Where the effective date of termination is between 6 April 2026 and 31 December 2026, the compensatory award is capped at £123,543 or 52 weeks' gross pay, whichever is lower. The basic award uses a week's pay capped at £751, up to a maximum of £22,530. There is no cap on the compensatory award in whistleblowing and health and safety cases, and the cap is removed for dismissals taking effect on or after 1 January 2027.

Do I have to give notice when dismissing for gross misconduct?

No. Where an employee has committed gross misconduct, the employer can dismiss without notice or pay in lieu. You must still follow a fair procedure first, including an investigation, a hearing at which the employee can respond and be accompanied, and a right of appeal. If the conduct was not serious enough to justify dismissal without notice, the employee may also have a wrongful dismissal claim for their notice pay.

Does an employee have the right to be accompanied at a disciplinary hearing?

Yes. Workers have a statutory right to be accompanied by a fellow worker, a trade union representative or an official employed by a trade union at a disciplinary hearing that could result in a formal warning or other disciplinary action, and at an appeal hearing. If the chosen companion cannot attend, you must postpone the hearing to a reasonable time the worker proposes, within five working days of the original date.

What happens if we do not follow the Acas Code of Practice?

Not following the Code does not in itself make you liable, but tribunals take it into account when deciding whether a dismissal was fair. If a relevant claim succeeds and the tribunal finds your failure to follow the Code was unreasonable, it can increase the award by up to 25%. Acas is consulting until 23 September 2026 on an updated Code, and the 2015 Code applies until a new one takes effect.

Can I dismiss an employee who is on long-term sick leave?

It can be fair, but only as a last resort and after a careful process. Consult the employee, obtain medical evidence with their consent, consider whether they are disabled under the Equality Act 2010 and whether reasonable adjustments or another role would help them return. If no reasonable adjustment would allow them to do the job, dismissal can be fair, but the risk of a disability discrimination claim means you should take advice before deciding.

Sources & further reading

• legislation.gov.uk — Employment Rights Act 1996, section 98
• legislation.gov.uk — Employment Rights Act 1996, section 108
• legislation.gov.uk — The Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026
• legislation.gov.uk — The Employment Rights (Increase of Limits) Order 2026
• Acas — Code of Practice on disciplinary and grievance procedures
• GOV.UK — Dismissing staff
• GOV.UK — Employment Rights Act 2025 factsheet: unfair dismissal
• Acas — How early conciliation works

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 17 September 2026. Buzz Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).