Hogg: Money talks
Shortening of the time limit and abolition of the cap on compensation for unfair dismissal will make law firms sharpen their procedures before dismissing staff, an employment lawyer has predicted.
Chris Hogg, partner at London firm Bloomsbury Square Employment Law, said a further consequence of the Employment Rights Act 2025 could be “reduced mobility” among senior solicitors because of the need for greater care in hiring them.
Mr Hogg said the Act was being implemented in stages, with reduction in the time limit for unfair dismissal claims from two years to six months and abolition of the current £118,000 cap on compensation awards coming into force next January.
Law firms would have to “make more effort and put in place more processes” to ensure dismissals were fair, whether it was through more proactive performance management or redundancy.
“It will be interesting to see how practices develop as a result of these changes. Law firms haven’t needed to do this until now – it’s not that they’ve lacked the resources.
“Money talks. People will change their practices if it hits their financial bottom line.”
He said some unfair dismissal compensation awards for senior law firm employees, which included some but not all salaried partners as well as senior associates, could exceed seven figures.
Unfair dismissal claims were cheaper to bring than discrimination or whistleblowing claims, where there is currently no cap on compensation awards but which were “much more complicated and costly” for claimants.
Mr Hogg predicted that there would be a big reduction in discrimination claims, since there was “still a stigma” attached to bringing them which “could be detrimental to your career”.
With unfair dismissal compensation no longer capped, “some disputes may become more straightforward and predictable but at a higher cost to firms”.
The changes could also open the way for “seven-figure” compensation awards, above the “high six-figure settlements” already seen in discrimination cases.
For senior lawyers with high fixed drawings or salary, performance bonuses or deferred awards, claims could reflect the “full value” of their earnings.
At the same time, some unfair dismissal claims may become more complicated, because tribunals would have to make “complicated financial decisions” on compensation, such as valuing the loss of shares in a startup.
He went on: “Although the reforms may make it easier for senior solicitors to pursue substantial employment claims without relying on more complex discrimination arguments, the broader effect could be reduced mobility.
“Senior-level appointments already commonly take six to nine months, and we may see timelines extend further as firms adopt a more cautious approach to hiring, making career moves at the top end of the profession even harder.
“This is likely to be felt most acutely in the lateral hire market at magic circle and other large City firms, where the financial exposure associated with a failed senior appointment could increase significantly.”
The combined effect of the changes to unfair dismissal could be that fewer senior lawyers were dismissed and law firms would be less likely to “take a chance” in appointing a senior lawyer “if they had any doubts”.
One downside of relaxing the rules on unfair dismissal could be a “massive increase” in employment tribunal claims, at a time when most tribunals were so overloaded they were listing hearings two or more years in the future.
The changes would double the time limit for bringing most employment tribunal claims from three months to six. “This could prolong uncertainty after senior departures and delay financial resolution.”
However, it was possible that fewer discrimination and whistleblowing claims might relieve some of the pressure on tribunals.