Compensation Claims for Unfair Dismissal: How They Work
Updated: Oct 10
Losing your job is hard, especially if you think you were let go unfairly. A claim for unfair dismissal can help you recover some of what you lost. This guide explains what unfair dismissal is, who can claim, how to make a claim and what compensation you might receive. It covers England, Wales and Scotland. Northern Ireland has its own rules. This is general information, not advice on your own case.
What is unfair dismissal?
In UK law, an employer needs a fair reason to dismiss you. The employer must also act reasonably and follow a fair process. If either is missing, the dismissal may be unfair.
The law sets out five potentially fair reasons for dismissal. They are conduct, capability, redundancy, a legal bar to continuing the job and some other substantial reason. You can read them in section 98 of the Employment Rights Act 1996. Even with a fair reason, a dismissal can still be unfair if the employer did not follow a fair process.
Ways a dismissal can be unfair
1. No fair reason
Your employer must have a genuine reason that the law accepts, such as poor performance or misconduct. If they do not, the dismissal is likely to be unfair.
2. An unfair process
Employers should follow a fair procedure. This usually means telling you the problem, holding a meeting, allowing you to put your side and offering an appeal. Skipping these steps can make a dismissal unfair. The Acas Code of Practice sets out the basics.
3. Automatically unfair reasons
Some reasons are automatically unfair. In these cases, you may not need the usual period of service to claim. Examples include dismissal because of:
Pregnancy or maternity leave.
Whistleblowing, which means reporting wrongdoing. See our guide to whistleblowing claims.
Trade union membership or activities.
Asserting a statutory right, such as the right to be paid the minimum wage.
Health and safety concerns.
4. Discrimination
If you were dismissed because of a protected characteristic, such as age, sex, race, religion or disability, you may have a discrimination claim as well. A discrimination claim does not need a minimum period of service. See our guide to workplace discrimination.
More examples of automatic unfair dismissal
Automatic unfair dismissal protects people who use certain rights. Beyond the examples above, a dismissal may be automatically unfair if the main reason is related to:
Family leave: maternity leave, adoption leave, paternity leave and parental leave.
Jury service: you cannot be dismissed for attending when called.
Union activities: joining a trade union or taking part in its legitimate activities.
Industrial action: in some situations, dismissal during lawful industrial action is automatically unfair.
Flexible working: a dismissal for making a statutory flexible working request. See our guide to flexible working.
Pay rights: asserting the right to the minimum wage or to a written statement of terms.
These rights depend on the facts and the wording of the law. In some cases, you will not need two years of service, so ask a lawyer before you assume you cannot claim.
Redundancy and unfair dismissal
Redundancy is a fair reason to dismiss, but the employer must still act fairly. That usually means a fair way of choosing who goes, consultation and a search for other jobs. If the employer used redundancy as a cover for another reason, or chose you unfairly, the dismissal may be unfair.
Notice period and dismissal without notice
Separate from unfair dismissal, your employer must usually give you the right notice period under your contract or the law. A dismissal without notice may be a wrongful dismissal, which is a breach of contract. Gross misconduct is the main exception. Both claims can sometimes be brought together, so tell your solicitor about any notice you did not receive.
Employment law and the Equality Act
Employment law is a mix of statutes, regulations and case law. The Employment Rights Act 1996 covers unfair dismissal. The Equality Act 2010 covers discrimination, including dismissal for a protected reason. A dismissal can break both laws at once, and each has different rules on time limits and service. That is why a careful review of the facts matters.
When to consider settling
Many cases end in a settlement. A settlement can give you money faster and avoid the stress of a hearing. Before you accept, think about what you could win at tribunal, what costs you may face and how long a hearing would take. In some cases, you will be asked to sign a settlement agreement, which must be signed after independent legal advice to be valid.
What is constructive dismissal?
Sometimes you resign because your employer has seriously breached your contract. If so, you may be able to claim constructive dismissal. The law treats this as a dismissal, so you can still bring a claim. These claims are hard to win. You must show a fundamental breach and that you resigned because of it. Read more in our guide to constructive dismissal claims.
Who can claim compensation?
Most employees can claim if:
You were an employee, not self-employed.
You were dismissed, or you resigned in circumstances that count as constructive dismissal.
You had enough service, unless the dismissal was automatically unfair.
At present, most employees need two years of service to claim ordinary unfair dismissal. This qualifying period has been under review, so check the current rule on GOV.UK before you rely on it.
Part-time and fixed term employees have the same rights as full-time staff. Employees on probation have the same rights too, but they still need the qualifying service unless the reason is automatically unfair.
How to make a claim for unfair dismissal
1. Try to resolve the issue at work
If you can, raise the problem with your employer or use the grievance or appeal procedure. This may also help your case later.
2. Gather evidence
Collect your contract, emails, performance reviews, warning letters and any notes of meetings. Write down a timeline.
3. Take legal advice
An employment solicitor can assess your chances and explain your options. Our article on finding an employment solicitor in London may help.
4. Start early conciliation
Before you claim, you must usually contact Acas. Acas offers early conciliation to try to settle the dispute without a hearing.
5. Submit your claim
If there is no settlement, you can submit a claim to the employment tribunal. The tribunal is a special court that hears disputes between employers and employees. There is no fee to start a claim. Our guide to employment tribunal claim steps explains each stage.
6. Attend a hearing
The tribunal listens to both sides and then decides. Be ready to explain why you think your dismissal was unfair. A settlement can still be reached before or during the hearing. If you are offered one, take advice first. See our article on whether you need a solicitor for a settlement agreement.
Types of compensation available
The basic award
The basic award is calculated in a similar way to a statutory redundancy payment. It depends on your age, your length of service and your weekly pay. Your weekly pay is subject to a cap, and the cap is changed each year.
The compensatory award
The compensatory award covers the money you lose because of the dismissal. This can include lost earnings, lost benefits and the cost of looking for a new job. There is usually an upper limit, which is also reviewed each year. You also have a duty to try to find new work, which is called mitigating your loss.
Loss of statutory rights
Tribunals often add a small sum for loss of statutory rights. This reflects the protection you lose until you build up service again.
Reinstatement and re-engagement
A tribunal can order your employer to give you your job back, which is reinstatement. It can also order a different role with the same employer, which is re-engagement. Such orders are rare in practice. Most successful claimants receive money.
For current limits, see GOV.UK and our guide to employment tribunal compensation limits. You can also read about GOV.UK employment tribunals.
What can reduce your compensation?
Your own conduct: if you contributed to the dismissal, the award may be reduced.
A fair process would have led to the same result: the tribunal can reduce the award if the dismissal would have happened anyway.
Failure to mitigate: if you do not look for work, the award may fall.
Failure to follow the Acas Code: either side can face an adjustment of up to 25% if the code is ignored.
Payments you already received: these are normally taken into account.
An illustration
The following example is only an illustration. It does not predict any real case. Say an employee aged 35 with 10 years of service has a claim. The basic award is built from the weekly pay and years of service. If the employee then loses six months of pay before finding a new job, the compensatory award can reflect that loss. A tribunal then considers any reductions. Real figures depend on your pay, age and facts.
Time limits for claims
You must normally make your claim within three months, less one day, of the date your employment ended. The clock is extended while you go through early conciliation. If you miss the deadline, you can lose the right to claim, and exceptions are narrow. Act quickly.
Tips for a strong claim
Act quickly: time limits are strict.
Keep records: save letters, emails and notes.
Stay professional: keep your communications calm and polite.
Ask for the reasons in writing: this fixes your employer's explanation.
Get support: a lawyer, a union representative or Acas can all help.
Losing your job unfairly is stressful. A claim can help you get the support you need. By knowing what unfair dismissal is, who can claim and what steps to follow, you can protect your rights. For a real-world example, see our article about a claim against a bank.
Frequently asked questions
What is the difference between unfair dismissal and wrongful dismissal?
Unfair dismissal is a statutory claim about the reason and the process. Wrongful dismissal is a claim that your employer broke your contract, for example by not giving the right notice.
Can part-time employees claim unfair dismissal?
Yes. Part-time employees have the same rights as full-time employees.
What if I was dismissed in a probation period?
You can claim only if you meet the service rule or the reason is automatically unfair. Discrimination claims need no service.
Do I need to pay a fee to claim?
No. There is no fee to start an employment tribunal claim.
Can I claim if I resigned?
Usually not, because the law expects you to have been dismissed. The exception is constructive dismissal, where your employer's serious breach of contract forced you out.
