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ARTICLE · 09 JUNE 2026

Employee Incentives: Optimizing Structures For Changes In UK Employment Law

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Any business operating with employees in the UK will likely be aware of the many changes that have been introduced, and are still to be introduced, under the Employment Rights Act 2025.

United KingdomEmployment and HR
Libby Payne
Libby Payne
Christina Morton
Christina Morton
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Any business operating with employees in the UK will likely be aware of the many changes that have been introduced, and are still to be introduced, under the Employment Rights Act 2025.

Two of the potentially most significant changes, taking effect on 1 January 2027, are the reduction in the qualifying period for unfair dismissal claims from two years to six months and the abolition of the cap on compensation for unfair dismissal claims (this is currently capped at the lower of 52 weeks' pay and £123,543). A third, which will take effect on 1 October 2026, is the increase from three to six months in the limitation period in which an employee can bring an unfair dismissal claim. As a result of these changes, we anticipate a sharp increase in the number of unfair dismissal claims threatened and presented at an employment tribunal, and in the amounts of money claimed. The removal of the cap on the total value of the claim is also likely to make settling claims more challenging and

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