Unfair Dismissal UK: What Employers Need to Know

Unfair dismissal is one of the most common employment tribunal claims. Understanding the rules can help you avoid costly mistakes and defend claims successfully.

What is Unfair Dismissal?

A dismissal is unfair if:

1. The employer didn't have a fair reason, OR
2. The employer didn't follow a fair procedure, OR
3. Dismissal wasn't a reasonable response in the circumstances

The 5 Fair Reasons for Dismissal

To fairly dismiss someone, you need one of these reasons:

1. Capability

The employee can't do the job properly due to:

• Lack of skill or qualifications
• Poor performance
• Ill health

2. Conduct

The employee has behaved inappropriately:

• Misconduct (warnings then dismissal)
• Gross misconduct (can justify summary dismissal)

3. Redundancy

The role is no longer needed:

• Business closure
• Workplace closure
• Reduced need for employees doing that work

4. Statutory Illegality

Continuing employment would break the law:

• Lost driving licence (if driving is essential)
• Lost right to work in UK
• Lost professional registration

5. Some Other Substantial Reason (SOSR)

A catch-all category including:

• Business reorganisation
• Breakdown in working relationships
• Refusal to accept new terms
• Third-party pressure

Who Can Claim Unfair Dismissal?

Generally, employees need:

• 2 years' continuous service from the effective date of termination
• To be an employee (not a worker or self-employed)
• To have been dismissed (including constructive dismissal)

No Qualifying Period Needed

Some dismissals are "automatically unfair" from day one:

• Pregnancy or maternity related
• Asserting a statutory right
• Whistleblowing
• Trade union membership or activities
• Health and safety complaints
• Asserting right to minimum wage
• Taking family leave

The Two-Part Test for Fairness

Part 1: Was There a Fair Reason?

The employer must show one of the 5 fair reasons.

Part 2: Did the Employer Act Reasonably?

The tribunal considers:

• Did they follow a fair procedure?
• Was dismissal within the "range of reasonable responses"?
• Did they consider alternatives?

Following a Fair Procedure

For conduct dismissals, follow the ACAS Code:

1. Investigate thoroughly
2. Write to the employee with allegations
3. Hold a meeting - let them respond
4. Allow them to be accompanied
5. Make a decision - consider all evidence
6. Offer an appeal

For capability (performance):

1. Set clear expectations
2. Give the employee a chance to improve
3. Provide support and training
4. Give warnings with review periods
5. Only dismiss after fair process

Compensation for Unfair Dismissal

Element	Maximum (2024-25)
Basic award	£21,000 (30 weeks' pay, capped at £700/week)
Compensatory award	£115,115 (or 52 weeks' gross pay if lower)
ACAS uplift	Up to 25% increase for failing to follow Code

Basic Award Calculation

• 1.5 weeks' pay for each year over age 41
• 1 week's pay for each year aged 22-40
• 0.5 weeks' pay for each year under 22
• Maximum 20 years counted
• Weekly pay capped at £700

Compensatory Award

Covers:

• Loss of earnings
• Loss of statutory rights
• Loss of pension
• Expenses in finding new work

Reduced by:

• Failure to mitigate losses
• Employee's contribution to dismissal
• Any payment made by employer

Common Unfair Dismissal Pitfalls

1. No Investigation

Dismissing without gathering evidence.

2. Pre-Determined Outcome

Deciding to dismiss before the hearing.

3. No Right of Appeal

Failing to offer or properly handle appeals.

4. Inconsistent Treatment

Different outcomes for similar cases.

5. Inadequate Warnings

For conduct/capability, usually need warnings first.

6. Not Considering Alternatives

Could a warning, transfer, or demotion work instead?

Defending an Unfair Dismissal Claim

If you're facing a claim:

1. Gather all documentation - investigation notes, letters, meeting notes
2. Check the procedure followed - did you follow ACAS Code?
3. Consider the reason - can you clearly articulate why you dismissed?
4. Review consistency - how were similar cases handled?
5. Assess strength - is settlement appropriate?

Best Practice

1. Have clear policies for conduct and capability
2. Train managers on handling disciplinary matters
3. Document everything from the start
4. Always investigate before deciding
5. Give employees a fair hearing
6. Consider alternatives to dismissal
7. Always offer an appeal
8. Take professional advice for complex cases