Employment Rights Act begins to come into force
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New caps on dismissal compensation caps
The Employment Rights (Increase of Limits) Order 2026 includes the latest annual increase in compensation limits. It takes effect on 6 April 2026.
Employers should be mindful, therefore, that any dismissals (including redundancies) taking effect on or after 6 April 2026 will be subject to the new rates where applicable.
The new rates will be as follows:
| Compensation Limit | Rate from 6 April 2026 | Rate prior to 6 April 2026 |
| Maximum limit on a week’s pay | £751 | £719 |
| Maximum compensatory award for unfair dismissal* | £123,543 | £118,223 |
* N.B. Relevant compensation awards are capped at the lower of the value set above, or a claimant’s gross annual salary.
Employers should also be mindful that it is expected that from 1 January 2027, that the cap on compensatory awards will no longer apply to dismissals occurring after this date. However, the cap on other payments, including a week’s pay (for redundancy pay purposes) will be retained.