Breaking point: how to exercise a commercial break clause
There are a series of significant and important changes to claims which may be brought before the employment tribunal, which will soon come into force, and which will affect all employers.
The changes are being introduced by the Employment Rights Act 2025.
Key dates at a glance
- 1 October 2026: time limits for most tribunal claims increase from three months to six months
- 1 January 2027: the qualifying period for ordinary unfair dismissal claims reduces from two years to six months
- 1 January 2027: the statutory cap on compensation in unfair dismissal claims is removed
- April 2027: the limit on a week's pay is anticipated to rise again
Tribunal time limits
Most claims currently have to be issued within a three-month time limit (albeit subject to complex rules around early conciliation).
However, from 1 October 2026 onwards the time limits for employees to make a claim will increase to six months.
This aims to allow more time for employers and employees to:
- consider the merits of making a claim to an employment tribunal
- resolve disputes before formal action is necessary
Requisite continuous employment
To bring an ordinary unfair dismissal claim to the employment tribunal, you must currently have been continuously employed by the same employer for a minimum period of two years. From 1 January 2027, that is being reduced to a period of only six months.
The new period of continuous employment will apply to all employees with effect from 1 January 2027 and therefore when it comes into play anyone hired on or before 1 July 2026 will be immediately protected.
This means that unfair dismissal can arise earlier in the employment relationship.
Employers will need to take this into account and think more carefully about anything regarding probation, performance, conduct and dismissal decisions.
Caps on tribunal awards
The amount of compensation that an employee may be awarded is potentially being increased:
- From 1 January 2027, the statutory cap on compensation in unfair dismissal claims will be removed. This means that any award will not be limited to either 12 months' gross pay or the current statutory cap of £123,543. However, the rules around mitigation and other measures which restrict compensation awards will remain unchanged.
- From 6 April 2026, the maximum limit on a week's pay went up to £751, with a maximum multiplier of 20 years of service and age weightings. As a result, the statutory redundancy payment and maximum basic award have risen to £22,530. It is anticipated that these will rise again in April 2027, although the figures for that increased cap are not yet known.
Commentary
The days of an employer simply being able to dismiss an employee and not worry about claims because the employee had under two years' employment had already gone, but these new changes cement that position and increase employee rights further.
The cumulative effect of the above is that employers are undoubtedly likely to face more claims from their employees under these changes, and when such challenges do arise the potential awards which are paid out could be more expensive than they are under the present system.
In order to prepare for the changes, employers should be reviewing their contracts of employment and their staff handbooks to ensure that they are both compliant with the law and that they have in place appropriate procedures to deal with any issues which arise at an early stage in the employment relationship.
You may also find our recent article on training cost clawbacks useful.
If you require any assistance with employment law matters, please contact Jason Alcock, a Director of Ansons Law and Head of the Dispute Resolution and Employment Law Department, either on jalcock@ansons.law or via our switchboard on 01543 263456.
Contact us to speak with a member of our Employment Law Team.
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This article is for general information only and does not constitute legal advice. If you have a specific query, please contact us directly.
