Dismissing an employee is one of the most difficult decisions a business owner can face. Get it wrong and you could end up at an employment tribunal, facing costly compensation awards and reputational damage. Get it right and you protect your business while treating people with dignity and fairness.
This guide walks you through the legal framework for fair dismissal in the UK, the procedures you must follow, and the common mistakes that trip employers up.
The five fair reasons for dismissal
Under Section 98 of the Employment Rights Act 1996 (ERA 1996), there are five potentially fair reasons for dismissing an employee. To defend an unfair dismissal claim, you must show that your reason falls into one of these categories and that you acted reasonably in treating it as sufficient grounds for dismissal.
1. Capability
This covers two areas: poor performance and ill health. If an employee cannot do their job to the required standard, you may have grounds to dismiss. However, you must first give them a genuine opportunity to improve. That means setting clear expectations, providing support or training, and allowing a reasonable review period before making any final decision. Our guide to managing employee performance walks through the full capability process step by step.
For long-term sickness, you should obtain up-to-date medical evidence, consider reasonable adjustments, and explore alternative roles before concluding that dismissal is the only option.
2. Conduct
Misconduct ranges from persistent lateness and insubordination to gross misconduct such as theft, fraud, or violence. For ordinary misconduct, you would typically follow a staged disciplinary process (verbal warning, written warning, final written warning) before dismissal. Gross misconduct may justify summary dismissal (without notice), but only after a proper investigation and disciplinary hearing.
3. Redundancy
A genuine redundancy arises when the business no longer needs an employee to carry out work of a particular kind, whether due to business closure, workplace closure, or a reduced need for employees to do that type of work. Redundancy has its own detailed procedural requirements, which we cover below.
4. Statutory illegality
Sometimes it becomes illegal for an employee to continue working in their role. The most common examples are losing the right to work in the UK (for example, a visa expiring) or a driver losing their licence when driving is essential to the job. You should still explore whether alternative work is available before moving to dismiss.
5. Some Other Substantial Reason (SOSR)
This is a catch-all category that covers situations not fitting neatly into the other four. Examples include a fundamental breakdown in working relationships, a client refusing to work with a particular employee, or the need to impose new contractual terms following a genuine business reorganisation. Tribunals will scrutinise SOSR dismissals closely, so you need solid evidence and a fair process.
Following the Acas Code of Practice
For misconduct and poor performance dismissals, the Acas Code of Practice on Disciplinary and Grievance Procedures sets out the minimum steps you must follow. Tribunals take this code seriously. If you fail to follow it without good reason, any compensation award can be increased by up to 25%.
The key steps are:
Investigate thoroughly without unreasonable delay. Gather the facts before deciding what action to take. This might involve interviewing witnesses, reviewing documents, or examining CCTV footage. Do not prejudge the outcome.
Notify the employee in writing. Set out the allegations and the evidence you have gathered. Give them enough detail to understand the case against them and enough time to prepare their response.
Hold a disciplinary meeting. The employee has a statutory right to be accompanied by a trade union representative or a work colleague. Schedule the meeting at a reasonable time and place.
Allow the employee to put their case. Listen to their explanation, consider any mitigating circumstances, and ask questions to clarify the facts. This is a genuine hearing, not a formality.
Make a decision and communicate it in writing. Explain the reasons for your decision clearly. If you are issuing a warning, set out what improvement is expected and the timeframe. If you are dismissing, confirm the reason for dismissal, the notice period, and the last day of employment.
Offer a right of appeal. The appeal should be heard by a more senior manager who was not involved in the original decision. If that is not possible in a small business, consider using an external HR professional to hear the appeal.
If you need support running a disciplinary process, our disciplinary and grievance service can guide you through every step.
The redundancy procedure
Redundancy dismissals follow a different process. To be fair, you must demonstrate:
- A genuine redundancy situation. The need for employees to do work of a particular kind must have ceased or diminished. Tribunals will look behind the label to check the redundancy is real.
- Consideration of alternatives. Before confirming any redundancy, you should explore redeployment, reduced hours, or voluntary redundancy.
- Fair and objective selection criteria. If selecting from a pool of employees doing similar work, use measurable criteria such as skills, qualifications, attendance records, and performance ratings. Avoid subjective or discriminatory factors.
- Individual consultation. Meet with each affected employee to explain the situation, discuss alternatives, and listen to their suggestions. Where you are proposing to dismiss 20 or more employees within a 90-day period, you must also carry out collective consultation with employee representatives.
- A right of appeal. As with any dismissal, the employee should have the opportunity to challenge the decision.
For more detailed guidance on managing redundancies, see our redundancy support page.
Statutory notice periods
Unless you are dismissing for gross misconduct (where summary dismissal without notice may be appropriate), you must give the employee their statutory or contractual notice, whichever is longer.
The statutory minimum notice periods under the ERA 1996 are:
- 1 week for employees with between 1 month and 2 years of continuous service
- 1 additional week per complete year of service after that, up to a maximum of 12 weeks (for employees with 12 or more years of service)
Always check the employment contract, as many contracts provide for longer notice periods than the statutory minimum. For a detailed look at how notice periods work in practice, including garden leave and payment in lieu, see our separate guide.
Written reasons for dismissal
An employee with two or more years of continuous service has the right to request a written statement of the reasons for their dismissal. You must provide this within 14 days of the request. Getting this wrong can result in an additional two weeks' pay being awarded by a tribunal.
From January 2027, this right will extend to employees with just six months of service, in line with the new qualifying period for unfair dismissal claims.
Upcoming law changes you need to know about
The Employment Rights Bill is bringing significant changes that will affect how employers approach dismissal:
- January 2027: Qualifying period drops to six months. Currently, employees need two years of continuous service to bring an unfair dismissal claim. From January 2027, this falls to just six months. This means fair procedures will matter from much earlier in the employment relationship.
- New statutory probationary period. The government is introducing a statutory probationary period with a lighter-touch dismissal process. Employers will still need to show a fair reason and follow a basic procedure, but the full Acas Code requirements may not apply during this initial period.
- Removal of the compensation cap. Unfair dismissal compensation is currently capped at the lower of 52 weeks' pay or a statutory maximum (currently just over 115,000 pounds). The government is removing this cap entirely, meaning potential liability for unfair dismissal becomes unlimited.
- Tribunal time limits extending. From October 2026, the time limit for bringing most employment tribunal claims extends from three months to six months. This gives employees more time to seek legal advice and bring claims.
These changes make it more important than ever to get your dismissal processes right. To understand exactly what is at stake, see our breakdown of the real cost of an employment tribunal for SMEs.
Common mistakes to avoid
Even with the best intentions, employers regularly fall into these traps:
- Skipping the investigation. Rushing straight to a disciplinary hearing without gathering the facts first is one of the most common reasons tribunals find dismissals unfair.
- Not giving enough time to improve. For performance-related dismissals, you must set realistic improvement targets and allow a reasonable period (typically 4 to 12 weeks) for the employee to demonstrate progress.
- Failing to consider alternatives. Particularly in redundancy situations, tribunals expect you to have genuinely explored whether there is other suitable work available.
- Not keeping written records. Document every meeting, every warning, and every decision. If it is not written down, it did not happen, at least as far as a tribunal is concerned.
- Dismissing without following the Acas Code. Even when you have a perfectly good reason for dismissal, failing to follow a fair procedure can make the dismissal unfair and increase any compensation award by up to 25%.
Get expert support
Dismissing an employee is rarely straightforward, and the consequences of getting it wrong are becoming more severe. In some situations, a settlement agreement can provide a quicker, less adversarial resolution than a full dismissal process. Whether you are dealing with a conduct issue, managing poor performance, or planning a restructure, having professional HR support can make the difference between a clean, defensible process and a costly tribunal claim.
If you are facing a difficult dismissal, our team can help. We offer practical, hands-on disciplinary and grievance support to guide you through every stage. If you would like to discuss your situation, book a free consultation and we will help you find the right approach.
