Employment tribunals after ERA 2025: higher stakes

Employment tribunal claims were already among the more significant operational risks facing UK businesses with 50 or more employees. ERA 2025 has made that risk meaningfully higher — not because the tribunal system itself has fundamentally changed, but because the pool of potential claimants has expanded, the compensation available has increased in some areas, and the procedural requirements for a fair dismissal are now more exacting.

The reduction of the unfair dismissal qualifying period is the most direct change. An employer can currently dismiss a new hire in the first two years with relatively limited tribunal exposure, and that two-year period still applies today. ERA 2025 cuts it to six months for dismissals on or after 1 January 2027 (commencement is still pending). There is no day-one unfair dismissal right; that proposal was dropped before the Act passed. Once the shorter period is in force, the volume of potential claims from the early-tenure cohort — historically the group with the highest turnover in many businesses — is expected to increase.

The basic award for unfair dismissal remains capped at £22,530 (2026/27). The compensatory award also remains capped — at the lower of £123,543 or 52 weeks' pay — with removal of that cap planned for 1 January 2027. The compensatory award is uncapped in cases involving automatic unfair dismissal (dismissal connected to pregnancy, whistleblowing, or trade union activity) and in cases where the tribunal finds discrimination alongside unfair dismissal. Combined claims — where both unfair dismissal and a discrimination element are present — are more common than claims under a single heading alone.

The ACAS uplift and reduction provisions remain in place. Where an employer unreasonably fails to follow the ACAS Code of Practice, the tribunal can increase the compensatory award by up to 25%. Where the employee has failed to follow the Code, the tribunal can reduce the award by up to 25%. These adjustments apply on top of the base compensation calculation.

Costs awards — where the tribunal orders one party to pay the other's legal costs — remain exceptional. The tribunal system is designed to be accessible without legal representation, and cost orders against employers who have mounted a reasonable defence remain rare. However, where a defence is found to be wholly without merit or where a party has behaved unreasonably in the litigation, costs can follow.

The three-month limitation period for most tribunal claims has not changed. An employee has three months less one day from the date of dismissal — or the last act complained of — to raise a claim. ACAS Early Conciliation is a mandatory first step before a claim can be lodged, but the time spent in Early Conciliation pauses the clock.

For employers, the practical response is prevention rather than defence. A well-documented process — concerns raised in writing, ACAS Code followed, outcome communicated clearly, appeal right offered — is the best protection against a tribunal claim, not just a defence in one.

See our ERA 2025 compliance checklist for the process updates most likely to reduce tribunal exposure, and disciplinary procedures: following the ACAS Code for the step-by-step disciplinary process.

Mellow maintains a timestamped audit trail of every HR action — from the first informal conversation to a final dismissal — so the documentation exists before you need it. [See Mellow pricing →](https://mellowhr.com/pricing)