The government has announced that the compensation limits for successful claims of unfair dismissal will be increased in April 2026. The key changes are:
- maximum compensatory award: increasing from £118,223 to £123,543.
- limit on a week’s pay[1]: increasing from £719 to £751.
These changes were set in the Employment Rights (Increase of Limits) Order 2026 and will apply to dismissals on or after 6 April 2026.
These uprating measures give employers a short period to prepare for potentially higher financial exposure in tribunal claims. Employers should consider reviewing ongoing litigation risk assessments, budgeting for potential awards, and ensuring that dismissal processes remain procedurally robust to mitigate the risk of claims.
Employers should also be aware of the larger reform package coming into force from January 2027, which will significantly reshape the unfair dismissal regime:
- lower qualifying period for unfair dismissal: reduced from two years continuous service to six months.
- removal of the statutory cap on compensatory awards: resulting in uncapped compensation for ordinary unfair dismissal claims.
In addition to these updates, the government has also confirmed upcoming changes to the National Minimum Wage and statutory pay limits. Further details can be found here: New Statutory rates and changes to National Minimum Wage in April 2026 | Global Workplace Insider
Thank you to Hannah Featonby-Lyons for all her help in preparing this post
[1] The ‘week’s pay’ is used to calculate the basic award for unfair dismissal.