The government has now confirmed the changes to unfair dismissal rights reducing the qualifying period from two years to six months, effective January 1, 2027. You should be aware that this will apply to any new employees commencing employment with you from 1 July 2026. The cap has also been removed on compensatory awards which means employees with six months’ service can claim uncapped compensation for ordinary unfair dismissal, potentially leading to much higher payouts for senior staff and shifting risk for employers, who must now focus heavily on robust early-stage performance management and documentation to avoid costly tribunal claims.
How will the Employment Rights Act 2025 impact tribunals?
These recent changes under the Employment Rights Act 2025 are expected to increase the volume of tribunal claims, at least in the short term while businesses get to grips with the new legislative landscape. The time limit for lodging claims is also set to be extended to six months, meaning employers may face disputes long after employment has ended. This, alongside the extension of the ACAS early conciliation period from six to 12 weeks, means that cases may not be raised for a considerable period after the workplace incident takes place.
Before a claim is submitted to the tribunal, the claimant must engage in early conciliation through ACAS to explore whether the dispute can be resolved. If conciliation is unsuccessful, the case proceeds to a tribunal, although there are opportunities for the conciliatory discussions to take place in advance of a hearing. In the interim, employers must prepare evidence and identify witnesses. In Scotland, where written witness statements are not used, robust record-keeping and contemporaneous notes are particularly important. At the main hearing, evidence is tested and witnesses questioned before the tribunal reaches a decision, either dismissing the claim or awarding remedies such as compensation.
The Broader Impact
Employment tribunals are typically judged by their final legal outcome. Success and failure are measured in terms of liability, awards and precedent. However, this approach overlooks the broader impact that tribunal proceedings can have on both individuals and the businesses involved. The operational and emotional toll can be just as significant, if not more so, than the costs involved. And crucially, these costs begin to accrue long before any judgment is reached.
While compensation remains the headline risk, the true cost of a tribunal often lies elsewhere: in management time diverted from the business, the strain placed on those involved and the prolonged uncertainty that can affect organisations throughout a process that may last many months. Even when a claim is successfully defended, businesses frequently emerge surprised by the scale of the financial burden, the emotional impact on those involved and the strain placed on teams having to manage ongoing disruption and operational challenges. These pressures are felt throughout the tribunal proceedings, from beginning to end.
Significant time is required for preparation, gathering evidence, coordinating witnesses and managing schedules of those giving evidence. This often means diverting senior managers away from day-to-day business operations for extended periods. This is compounded by the time required for senior staff to attend and participate in hearings and negotiations, which can last for days at a time, translating directly into lost operational time and decreased productivity as attention is taken away from usual business activities. It can also be an emotionally taxing experience, both for the individual bringing a claim and for those representing the business in its defence.
After a tribunal concludes, organisations must then address any fallout, support affected staff and apply lessons learned to reduce the risk of future disputes. Considerable HR and management time may be required to review, update and implement new or amended policies to ensure ongoing legal compliance. In addition, a tribunal can have a lasting impact on workplace culture, making it essential for employers to invest time and effort in rebuilding trust and maintaining a positive, engaged working environment.
Prevention is the best cure
Understanding the time and effort involved in preparing for and progressing through an employment tribunal highlights why prevention is often the most effective approach. While disputes cannot always be avoided, many of the risks and associated costs can be significantly reduced through early planning and robust people management practices.
You should take a proactive stance in reviewing your contracts and updating policies to reduce the risk of disputes occurring. We would recommend that you ensure probationary periods are set at six months and that you follow a structured probationary review process.
Early advice can also make a decisive difference. Seeking guidance from us at the first sign of an issue, rather than after a submission has been made to ACAS or a claim has been lodged, allows us to support you in resolving matters more effectively, preventing escalation and protecting both you and your business.
