Terminating employment fairly in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Dismissing an employee lawfully requires a fair reason, a fair process, and — once the qualifying period is met — compliance with unfair dismissal rules. Getting any of those elements wrong can lead to an employment tribunal claim.
What counts as a fair reason for dismissal
UK employment law sets out five potentially fair reasons for dismissal under the Employment Rights Act 1996:
- Conduct – misconduct or gross misconduct, such as theft, serious insubordination, or repeated policy breaches.
- Capability – poor performance or ill health that prevents the employee from doing their job.
- Redundancy – the role is no longer needed, or the business is closing or relocating.
- Statutory illegality – continuing employment would break the law (for example, a driver who has lost their licence).
- Some other substantial reason (SOSR) – a catch-all that covers genuine business reorganisations, irretrievable breakdowns in trust, or end of a fixed-term contract.
Having a fair reason is necessary but not sufficient. You must also follow a fair procedure.
The qualifying period for unfair dismissal protection
Employees do not have unfair dismissal rights from their first day of work. Under current law, the qualifying period is two years of continuous employment. This means that, for most dismissals today, an employee must have worked for you continuously for two years before they can bring an unfair dismissal claim.
That threshold is changing. Under the Employment Rights Act 2025, which received Royal Assent in December 2025, the qualifying period will reduce to six months for dismissals on or after 1 January 2027. Employers should begin reviewing dismissal processes now so that fair procedures are embedded well before that date arrives.
One important point: there is no statutory probation period in UK law. Probation is a contractual arrangement only. During a contractual probationary period, unfair dismissal protection still depends on whether the employee has reached the qualifying threshold — not on whether probation has ended.
Some dismissal reasons carry day-one protection regardless of length of service. Dismissing someone for a protected characteristic (race, sex, disability, religion, and so on), for whistleblowing, for asserting a statutory right, or for trade union activities is automatically unfair or unlawful from the very first day of employment.
Following a fair procedure
Even where you have a solid reason for dismissal, an unfair procedure can make a dismissal unfair. The ACAS Code of Practice on Disciplinary and Grievance Procedures sets the benchmark that employment tribunals apply. While the Code is not legally binding in itself, tribunals can uplift any compensation award by up to 25 per cent if an employer unreasonably fails to follow it.
A fair disciplinary procedure typically includes:
1. Investigation – gather the facts before deciding what action, if any, to take.
2. Written notification – inform the employee in writing of the allegation and potential outcome, including that dismissal is possible.
3. Disciplinary hearing – give reasonable notice and allow the employee to be accompanied by a trade union representative or work colleague.
4. Decision – communicate the outcome in writing without unreasonable delay.
5. Right of appeal – offer a genuine appeal, ideally heard by a more senior manager not involved in the original decision.
For capability and redundancy dismissals the process differs in detail — redundancy requires fair selection criteria, meaningful consultation, and consideration of suitable alternative roles — but the underlying principle is the same: the employee must be treated reasonably throughout.
Notice, final pay, and administrative obligations
Unless you are dismissing for gross misconduct (where summary dismissal without notice may be appropriate), you must give at least the statutory minimum notice: one week per complete year of service, up to a maximum of twelve weeks, or the contractual notice period if that is longer.
Final pay must include all outstanding salary, accrued but untaken annual leave (employees are entitled to 5.6 weeks' statutory leave per year), and any other contractual entitlements. If the employee has worked in the tax year being closed, ensure their payroll records are accurate; a P60 must be issued by 31 May following the end of the tax year, and any benefits in kind reported on a P11D by 6 July. All payments should be reported to HMRC in real time via a Full Payment Submission on or before the final payday.
Payments in lieu of notice (PILON) are subject to income tax and National Insurance in the usual way. Genuine compensation for loss of office (above the £30,000 tax-free threshold) is treated differently, and specialist advice is worth taking before agreeing a settlement.
Preparing for the changes ahead
The Employment Rights Act 2025 does not introduce day-one unfair dismissal rights, but the reduction of the qualifying period to six months from January 2027 will significantly expand the population of employees who can bring claims. Employers who rely on dismissals during an early employment period to manage poor fit should act now: document performance concerns early, apply consistent procedures from day one, and ensure managers understand that fair treatment is not optional once the six-month threshold approaches. Guaranteed-hours and fire-and-rehire reforms are also expected to take effect in 2027, making a broader review of employment practices prudent.
This article provides general information only and does not constitute legal advice. Employment law is complex and fact-specific; always take professional advice before dismissing an employee.
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