Cap Removal from January 2027
The Employment Rights Act 2025 abolishes the statutory cap on unfair dismissal compensatory awards from 1 January 2027. Tribunals will assess compensation based solely on the employee's actual financial loss. The current cap (the lower of 52 weeks' gross pay or £118,223) will no longer limit exposure for senior employees and high earners.
Qualifying Period Reduction
The unfair dismissal qualifying period reduces from two years to six months on the same date. More employees will gain protection, increasing ET claim volumes and the need for expert loss evidence in cases that previously settled below the cap without detailed quantification.
Polkey in an Uncapped World
With uncapped awards, Polkey deductions become a critical tool for employers facing significant exposure. Employment loss experts should be instructed to model the financial impact of 0%, 25%, 50%, and 75% Polkey reductions so solicitors can advise clients on realistic settlement ranges and prepare tribunal submissions.
Schedule of Loss Methodology
Schedules of Loss must now be prepared with the rigour of High Court litigation schedules. Each head (immediate loss, future loss, pension loss, loss of statutory rights) requires net income assessment, mitigation analysis, and supporting documentation. Templates designed for capped cases will underestimate exposure in uncapped claims.
Expert Instruction from 2027
Employment loss experts will be required in virtually every significant ET case. Instruct early to establish baseline loss figures, support without prejudice negotiations, and ensure Polkey and mitigation arguments are supported by financial modelling rather than assertion.