Calculate your unfair dismissal settlement

Dismissal is potentially unfair when your employer either had no valid reason, or had a reason but handled the process badly. A fair dismissal requires a potentially fair reason (such as conduct, capability, or redundancy) and a fair procedure. If you were not given a proper warning, not given a chance to respond, or feel the decision was made before any investigation took place, those are all things a solicitor will want to look at. You need two years of continuous service for an ordinary unfair dismissal claim, but some reasons for dismissal are automatically unfair with no qualifying period at all.

The two-year qualifying period does not apply to every type of claim. If your dismissal was connected to whistleblowing (a protected disclosure under ERA 1996 s.103A), pregnancy or maternity leave, trade union membership or activity, or asserting a statutory right, those are automatically unfair regardless of how long you have worked there. If any of these might apply to your situation, it is worth getting advice before assuming you have no claim.

An unfair dismissal award has two parts. The basic award is calculated on your age, weekly pay (capped at £751 from April 2026), and years of service, up to a maximum of £22,530. The compensatory award reflects your actual financial loss: immediate lost earnings, future job loss, lost benefits, and pension. From April 2026, the compensatory cap is £123,543 or 52 weeks' gross pay, whichever is lower. The total award can also be increased by up to 25% if your employer failed to follow a fair disciplinary process.

A tribunal, or the parties when settling, will look at your financial loss from the date of dismissal. That includes immediate lost earnings up to settlement or hearing, future earnings if you have not yet found a comparable job, loss of pension contributions, and a small conventional sum for loss of statutory rights. If you contributed to the dismissal in any way, the award may be reduced. If your employer failed to follow the ACAS Code of Practice on disciplinary procedures, the award can be increased.

A settlement is certain, private, and faster. A tribunal claim can take many months and the outcome is never guaranteed. Your employer may argue that the dismissal was procedurally fair, that you contributed to it, or seek a Polkey reduction for factors that reduce the award. That is not a reason to accept a low offer, but it is a reason to get proper advice on what the claim is realistically worth before deciding. Most cases settle before a hearing, often during ACAS early conciliation.

The first £30,000 of a termination payment, including the basic award and compensatory element, is tax-free under ITEPA 2003 s.403. Amounts above £30,000 are taxable at your marginal rate. Payment in lieu of notice (PILON) is always taxed as earnings under ITEPA 2003 s.402D, regardless of what your settlement agreement calls it. How the payment is allocated in the agreement affects what you take home, which is one reason the drafting matters.

Yes. Under ERA 1996 s.203, a settlement agreement is only legally binding if you have received independent legal advice from a qualified, insured, SRA-regulated solicitor who is identified in the agreement. Your employer is required to contribute to that cost, typically between £350 and £750, which in most cases covers the full fee. The settlement agreement cannot validly waive your employment claims without that advice being in place.

Before you can bring a claim to an Employment Tribunal, you must first notify ACAS and allow them the opportunity to help resolve the dispute. This is a legal requirement under ERA 1996 s.18A and is known as early conciliation. The process is free and confidential, usually takes up to six weeks, and many cases settle during this window. If it does not resolve the matter, ACAS issues a certificate that allows you to proceed to tribunal.