Wrongful Dismissal UK 2026: 2 Years, Notice & Compensation

Wrongful dismissal is a breach of contract claim arising where an employer terminates employment in breach of the employee’s contractual rights under the employment contract. In most cases, the breach relates to notice — either because no notice was given, insufficient notice was provided, or payment in lieu of notice was not lawfully made. Unlike unfair dismissal, wrongful dismissal is not concerned with whether the employer acted reasonably or followed a fair procedure. The question is whether the contract was breached and what financial loss flows from that breach.

Under UK law, wrongful dismissal claims are grounded in common law principles of contract, although statutory notice rights operate as a minimum floor for employees with at least one month’s continuous service (unless summary dismissal is legally justified). The claim focuses on financial loss flowing from the breach, typically limited to pay and contractual benefits during the notice period. Damages are not awarded for the manner of dismissal, distress, stigma or reputational harm.

Wrongful dismissal is often confused with unfair dismissal, particularly because the two claims can arise from the same termination. However, they are legally distinct. Unfair dismissal is a statutory claim based on fairness and reasonableness, whereas wrongful dismissal is a contractual claim based on notice and other contractual entitlements. The distinction matters in practice, especially where employees have under two years’ service (who may still have day-one contractual rights even where ordinary unfair dismissal protection is not available, subject to exceptions such as automatically unfair dismissal).

This guide explains what wrongful dismissal means under UK law, how it differs from unfair dismissal, and who can bring a claim, including employees with under two years’ service and those dismissed during probation. It examines wrongful dismissal compensation, remedies available in the tribunal and civil courts, and common risk areas such as dismissal during probationary periods and early termination of fixed-term contracts. The article concludes with practical guidance for employers on reducing exposure to wrongful dismissal claims.

Section A: What Is Wrongful Dismissal in UK Law?

Wrongful dismissal is a contractual claim arising where an employer terminates employment in breach of the employee’s contract. It is rooted in common law principles and focuses on whether the employer has failed to honour express or implied contractual obligations when bringing employment to an end. In practice, most wrongful dismissal claims arise from disputes over notice, but the scope of the claim is wider than notice alone.

Understanding the legal foundation of wrongful dismissal is critical for both employers and employees. It determines who can bring a claim, what must be proved, and what compensation may be awarded.

1. The legal definition and contractual basis

At its core, wrongful dismissal is a claim for breach of contract. The employee must show that there was a valid contract of employment, that the employer terminated that contract, that the termination breached a contractual term and that the employee suffered financial loss as a result.

The breach may relate to an express term, such as a contractual notice clause, or an implied term, such as the implied obligation not to terminate without proper notice unless the employee has committed a repudiatory breach. A repudiatory breach is a serious breach that goes to the root of the contract and entitles the innocent party to treat the contract as at an end.

Although wrongful dismissal is a common law claim, statutory notice rights provide a minimum standard for employees with at least one month’s continuous service. Where the contract provides for longer notice than the statutory minimum, the contractual entitlement will apply. Where the contract is silent, statutory minimum notice may still be owed (unless summary dismissal is legally justified).

The key point is that wrongful dismissal is not concerned with whether the dismissal was fair, justified or reasonable. The issue is whether the employer complied with the contractual framework governing termination, including notice and any contractual termination steps.

2. Common examples of wrongful dismissal

The most frequent scenarios include dismissing an employee without giving their contractual notice period, failing to provide the statutory minimum notice where no longer contractual notice exists, making a payment in lieu of notice where no valid payment in lieu clause exists, summarily dismissing an employee where the conduct does not amount to a repudiatory breach, terminating a fixed-term contract early without an express right to do so and failing to follow a contractual dismissal procedure where the procedure forms part of the contract.

In the case of summary dismissal, the employer must be able to demonstrate that the employee committed a serious breach of contract justifying termination without notice. It is not sufficient simply to label behaviour as gross misconduct. If the conduct does not meet the legal threshold of a repudiatory breach, dismissal without notice will constitute wrongful dismissal, even if the employer believed the conduct justified immediate termination. Employers should also be mindful of the practical and evidential risks in misconduct cases, including the standards typically expected in workplace investigations and decisions, particularly where dismissal is for misconduct.

Similarly, where an employer makes a payment in lieu of notice without a contractual right to do so, this can amount to a breach of contract. While damages may be limited if the employee suffers no financial loss beyond the notice pay received, the dismissal may still be wrongful in legal terms. For employers, an unlawful payment in lieu can also have wider contractual consequences, including the risk that post-termination restrictions may not be enforceable if the employer has brought the contract to an end in repudiatory breach. This is particularly relevant where the employer seeks to rely on restrictive covenants to protect business interests after termination.

3. Is wrongful dismissal about fairness?

Wrongful dismissal is often confused with unfair dismissal, but fairness plays no role in a wrongful dismissal claim. An employer may follow a flawless disciplinary procedure and still commit wrongful dismissal if they fail to give proper notice. Equally, an employer may act abruptly but avoid wrongful dismissal if the employee has committed a serious contractual breach justifying summary dismissal.

A tribunal or court will not examine whether the employer acted reasonably, whether a proper investigation was conducted, or whether the decision fell within a band of reasonable responses. Those considerations belong to unfair dismissal law under the Employment Rights Act 1996 and are commonly explored in unfair dismissal claims.

Wrongful dismissal is therefore narrower in scope but more technical in focus. It is concerned with contractual compliance, not procedural fairness, and damages are limited to financial loss flowing from the breach, not compensation for the manner of dismissal.

Section Summary

Wrongful dismissal arises where an employer breaches the employment contract when terminating employment, most commonly by failing to provide proper notice or by unlawfully ending a fixed-term arrangement. It is a contractual claim rooted in common law, distinct from unfair dismissal, and focused solely on whether contractual termination rights were honoured and what financial loss resulted.

Section B: Wrongful Dismissal vs Unfair Dismissal

Wrongful dismissal and unfair dismissal are frequently confused, yet they are legally distinct claims governed by different principles. Understanding the difference is critical, particularly because the availability of each claim depends on different eligibility criteria and leads to different remedies. In many cases, both claims may arise from the same dismissal, but they address different legal wrongs.

1. The key legal differences

Wrongful dismissal is a contractual claim. It arises where the employer breaches the employment contract, most commonly by failing to provide notice or by unlawfully terminating a fixed-term agreement. The focus is on contractual entitlement and the financial loss that flows from the breach.

Unfair dismissal, by contrast, is a statutory claim under Part X of the Employment Rights Act 1996. It concerns whether the employer had a potentially fair reason for dismissal and whether they acted reasonably in treating that reason as sufficient in all the circumstances. Employers should also be aware that unfair dismissal eligibility will usually depend on qualifying service, subject to exceptions, including automatically unfair dismissal.

The core distinctions can be summarised as follows:

• Source of law: Wrongful dismissal arises under common law contract principles. Unfair dismissal arises under statute and is commonly pursued through an unfair dismissal claim.
• Qualifying service: Wrongful dismissal has no qualifying service requirement. Unfair dismissal usually requires two years’ continuous service, although employees dismissed with short service may still have statutory protection in certain cases, including those explored in unfair dismissal under 2 years scenarios.
• Legal test: Wrongful dismissal asks whether the contract was breached. Unfair dismissal asks whether the employer had a potentially fair reason and followed a fair process in reaching the decision.
• Compensation framework: Wrongful dismissal damages are limited to contractual financial loss, typically notice pay and benefits. Unfair dismissal compensation is structured differently and subject to statutory rules and caps, which employers should monitor as they develop.
• Remedies: Wrongful dismissal provides damages only. Unfair dismissal can, in limited cases, result in reinstatement or re-engagement, although compensation is the most common outcome.

These differences explain why an employee dismissed during probation may have no unfair dismissal claim but may still pursue wrongful dismissal if notice rights were breached. Equally, an employee may have a strong unfair dismissal case even where notice has been paid in full, if the employer lacked a fair reason or failed to follow a fair process.

2. When both claims arise together

It is common for employees with more than two years’ service to bring claims for both wrongful and unfair dismissal following the same termination. For example, an employer may dismiss an employee without notice and also fail to follow a fair procedure. In such circumstances, the lack of notice may found a wrongful dismissal claim, while the unfair process or absence of a fair reason may found an unfair dismissal claim.

However, an employee cannot recover twice for the same financial loss. Any damages awarded for notice under a wrongful dismissal claim would be taken into account when assessing compensation for unfair dismissal, to prevent double recovery for identical losses.

Where claims are pursued in the Employment Tribunal, they must normally be lodged within three months less one day of the effective date of termination, subject to ACAS Early Conciliation requirements and the tribunal’s jurisdictional rules.

3. Which claim carries greater financial risk?

In practice, the relative financial value of each claim depends on the employee’s circumstances and the nature of the breach.

Wrongful dismissal claims can be significant where the employee has a lengthy contractual notice period or is a high earner, because damages are tied to the contract. For example, a senior executive with a 12-month notice clause may have substantial contractual exposure if dismissed without notice.

Unfair dismissal compensation is calculated on different principles and is subject to statutory limits. Employers should be alert to developments affecting the unfair dismissal compensation regime, including proposals and commentary in relation to statutory caps and reform, such as those discussed in unfair dismissal compensation cap changes.

From an employer’s perspective, wrongful dismissal risk is often technical and arises from oversight of contractual terms, while unfair dismissal risk commonly arises from flawed decision-making, weak evidence, poor procedure or reliance on an incorrect statutory reason. For context, unfair dismissal disputes frequently turn on the employer’s ability to evidence the dismissal reason, such as conduct, capability (see capability dismissal) or reliance on “some other substantial reason” (see SOSR dismissal).

Section Summary

Wrongful dismissal and unfair dismissal are separate legal claims with different foundations, eligibility requirements and remedies. Wrongful dismissal concerns breach of contract, particularly notice and contractual termination rights, while unfair dismissal focuses on fairness and reasonableness under statute. Both claims may arise together, but they compensate different legal wrongs and must be managed differently by employers.

Section C: Who Can Claim Wrongful Dismissal?

One of the most significant features of wrongful dismissal is that it is not subject to the two-year qualifying service requirement that applies to most unfair dismissal claims. Because wrongful dismissal is a contractual claim, eligibility depends on the existence of contractual rights rather than length of service. This has important implications for dismissals during probationary periods, short-service employees and those engaged on fixed-term contracts.

1. Wrongful dismissal UK under 2 years

An employee does not need two years’ continuous service to bring a wrongful dismissal claim. If the employer breaches the employment contract when terminating employment, the claim can arise from day one.

This is a key distinction from ordinary unfair dismissal claims, which generally require two years’ service unless the dismissal falls within a category of automatically unfair dismissal. Employers should therefore avoid assuming that short service eliminates legal risk. Even where an employee cannot pursue an unfair dismissal claim, they may still have enforceable contractual rights.

For example, if an employee with three months’ service is entitled under their contract to one month’s notice but is dismissed without notice and without conduct amounting to a repudiatory breach, they may have a valid wrongful dismissal claim. The absence of a qualifying service threshold means that employers must comply with contractual notice provisions from the outset of employment.

2. Dismissal during a probationary period

Dismissal during probation is a common source of misunderstanding. Many employers assume that because an employee is “on probation”, fewer legal protections apply. While unfair dismissal protection may be limited due to insufficient service, contractual rights still apply in full.

If a contract provides for one week’s notice during probation, that entitlement must be honoured unless the employee has committed a repudiatory breach justifying summary dismissal. Failure to give contractual or statutory minimum notice can amount to wrongful dismissal, regardless of the employee’s short service or probationary status.

Statutory minimum notice applies once an employee has completed one month’s continuous service. Before one month’s service, there may be no statutory minimum entitlement unless the contract provides for notice. After one month’s service, at least one week’s statutory notice is required, unless summary dismissal is legally justified.

Employers should also ensure that probationary procedures are applied consistently and transparently. While procedural fairness is not relevant to wrongful dismissal as such, poor management of probation can increase the likelihood of parallel statutory claims. Practical guidance on structuring and managing probation can be found in resources covering the probation period and related reviews.

The label of “probation” does not displace contractual obligations. The decisive question remains whether the employer complied with the contract.

3. Fixed-term contracts and early termination

Wrongful dismissal claims frequently arise in the context of fixed-term contracts. If an employer terminates a fixed-term contract before its agreed expiry date without a contractual right to do so, this may amount to a breach of contract.

Where there is no early termination clause, the employee may be entitled to damages representing the value of salary and contractual benefits for the remainder of the fixed term, subject to the duty to mitigate loss. This can create significant financial exposure, particularly where a substantial period remains.

If the contract includes a valid notice clause permitting early termination, the employer must comply strictly with that clause. Any contractual break clause or termination mechanism must be exercised in accordance with its wording. Failure to comply with notice requirements, timing provisions or contractual conditions may result in wrongful dismissal liability.

The principle of mitigation applies in all wrongful dismissal claims. The employee is expected to take reasonable steps to obtain alternative employment. The burden of proving a failure to mitigate rests on the employer. An employee is not required to accept employment that is materially inferior or unsuitable. Any earnings received during the notice period or remaining fixed term may reduce the damages recoverable.

Further practical considerations arise in relation to fixed-term arrangements, including those discussed in guidance on fixed-term contracts, particularly where early termination rights are absent or ambiguously drafted.

Section Summary

Wrongful dismissal can be claimed from day one of employment, including during probationary periods and by employees with under two years’ service. There is no qualifying service requirement. Employers must comply with contractual and statutory notice obligations at all stages of employment, and particular care is required when terminating fixed-term contracts early or relying on summary dismissal.

Section D: Wrongful Dismissal Compensation and Remedies

The remedies for wrongful dismissal are limited in scope but can be financially significant, particularly where senior employees, lengthy notice periods or fixed-term contracts are involved. Because the claim is contractual in nature, compensation is designed to place the employee in the financial position they would have been in had the contract been lawfully performed. It is not intended to punish the employer or compensate for the manner of dismissal.

1. How wrongful dismissal compensation is calculated

Compensation for wrongful dismissal is based on financial loss flowing directly from the breach of contract. In most cases, this will equate to the value of pay and contractual benefits during the notice period that should have been given.

This may include:

• Net salary for the contractual or statutory notice period
• Contractual bonuses and commission that would have accrued during notice
• Pension contributions
• Private medical cover
• Car allowance or other contractual benefits

The calculation is focused strictly on contractual entitlement. If an employee was entitled to three months’ notice but was dismissed without notice, damages will usually reflect three months’ net remuneration and associated benefits.

In the case of fixed-term contracts terminated early without a lawful termination clause, damages may reflect the value of the remaining term, again subject to mitigation. Where the contract contains a break clause or early termination provision, the court will examine whether it was exercised strictly in accordance with its wording.

Damages for wrongful dismissal do not include compensation for injury to feelings, distress, reputational harm or the manner of dismissal. The claim is limited to financial loss caused by breach of contract. This reflects long-established common law principles that restrict damages in employment contract termination cases to financial loss.

2. The duty to mitigate loss

Employees bringing a wrongful dismissal claim are under a duty to mitigate their loss. This means they must take reasonable steps to obtain alternative employment during what would have been the notice period or the remaining fixed term.

If the employee secures a new role during that period, earnings from that employment will normally be deducted from any damages awarded. The burden of proving that the employee failed to mitigate rests on the employer. An employee is not required to accept employment that is materially inferior, unsuitable or inconsistent with their experience and status.

The principle of mitigation applies whether the claim is pursued in the Employment Tribunal or the civil courts.

3. Tribunal limits and civil court claims

Wrongful dismissal claims can be brought either in the Employment Tribunal or in the civil courts.

In the Employment Tribunal, breach of contract claims arising or outstanding on termination are subject to a compensation cap of £25,000. Claims must normally be brought within three months less one day of the effective date of termination, subject to ACAS Early Conciliation requirements and the tribunal’s jurisdictional limits.

In contrast, there is no upper financial limit on damages in the civil courts. The limitation period for breach of contract claims in the county court or High Court is six years from the date of breach. High-value claims, such as those involving lengthy notice periods or substantial fixed-term entitlements, are therefore often pursued in the civil courts.

Employers dealing with senior departures should also consider the interaction between contractual termination rights and any post-termination restrictions, particularly where disputes arise over notice or payment in lieu. Improper termination may affect enforceability of contractual protections.

4. What remedies are available?

The primary remedy for wrongful dismissal is an award of damages. There is no statutory remedy of reinstatement or re-engagement in a wrongful dismissal claim, as the claim is contractual rather than statutory in nature.

The court or tribunal will not assess whether the employer acted reasonably or whether the dismissal was procedurally fair. The only question is whether the employer breached the contract and, if so, what financial loss resulted from that breach.

Section Summary

Wrongful dismissal compensation is limited to contractual financial loss, usually covering notice pay and associated benefits. It does not include injury to feelings or punitive damages. Claims can be brought in the tribunal, subject to a £25,000 cap, or in the civil courts without a financial limit and with a longer limitation period. Employers must therefore assess contractual exposure carefully before terminating employment.

Section E: How Employers Can Avoid Wrongful Dismissal Claims

Wrongful dismissal claims typically arise not from complex legal disputes, but from avoidable contractual oversights. Employers often focus on whether a dismissal is fair, while overlooking whether it complies with the employee’s contractual termination rights. A structured, contract-led approach to termination decisions significantly reduces exposure.

1. Review contractual notice provisions before dismissal

Before terminating employment, employers should review the employee’s employment contract carefully to confirm the length of contractual notice, whether notice differs during probation, whether enhanced notice applies after a certain period of service and whether statutory minimum notice has been triggered.

Failure to comply with a contractual notice clause is the most common basis for wrongful dismissal claims. Employers should also cross-check contractual notice with statutory minimum requirements and guidance on the statutory notice period. Even where dismissal is substantively justified, non-compliance with notice obligations may result in liability.

2. Ensure a valid and carefully drafted payment in lieu clause

If the employer intends to terminate employment immediately and make a payment in lieu of notice, the contract should contain a clearly drafted and enforceable payment in lieu clause.

Without a valid clause, summary termination with payment may constitute a repudiatory breach of contract. While financial exposure may be limited in some cases, the breach can have wider legal consequences. In particular, an employer who terminates in repudiatory breach may lose the benefit of post-termination protections, including restrictive covenants designed to protect confidential information, client relationships and workforce stability.

Employers should therefore ensure that payment in lieu provisions are clear, comprehensive and consistently applied.

3. Assess summary dismissal decisions rigorously

Summary dismissal without notice is lawful only where the employee has committed a repudiatory breach of contract. While employers frequently rely on allegations of gross misconduct, the conduct must genuinely reach the legal threshold required to justify dismissal without notice.

It is not sufficient simply to categorise conduct as gross misconduct in a policy. The employer must be able to demonstrate that the conduct was serious enough to destroy the relationship of trust and confidence. If the conduct does not amount to a repudiatory breach, dismissal without notice will constitute wrongful dismissal, even if the employer believed the conduct justified immediate termination.

Where dismissal is for misconduct, employers should also be mindful of evidential standards typically examined in statutory claims, including those considered in discussions of the Burchell test, even though wrongful dismissal itself is contractual in nature.

4. Manage fixed-term contracts with precision

Fixed-term contracts require particular care. Before terminating a fixed-term contract early, employers should confirm that the contract contains an express early termination clause and that any notice requirements under that clause are strictly observed.

Where no such clause exists, early termination may expose the employer to damages representing the value of the remaining term, subject to mitigation. Employers should review relevant guidance on fixed-term contracts and ensure that termination rights are clearly drafted at the outset of the engagement.

Strict compliance with contractual wording is essential. Minor procedural oversights can result in significant financial exposure.

5. Consider settlement agreements where appropriate

In cases involving senior employees, complex remuneration structures or potential disputes over notice and bonuses, a negotiated settlement agreement can provide certainty and reduce litigation risk. A properly drafted agreement can include a waiver of claims for both wrongful and unfair dismissal, subject to statutory requirements for validity.

Settlement may be particularly appropriate where there is potential dispute over notice entitlement, bonus accrual or termination mechanics. In redundancy situations, employers may also consider tailored approaches such as a redundancy settlement agreement where appropriate.

A proactive and structured approach to exit management reduces the likelihood of contractual breaches and costly disputes.

Section Summary

Most wrongful dismissal claims arise from failure to comply with contractual notice or termination provisions. Employers can significantly reduce risk by reviewing contractual terms carefully, ensuring valid payment in lieu clauses, assessing summary dismissal decisions rigorously, managing fixed-term contracts precisely and considering settlement agreements where appropriate.

FAQs

What is wrongful dismissal in UK law?

Wrongful dismissal is a breach of contract claim that arises when an employer terminates employment in breach of contractual rights, most commonly by failing to provide proper notice. It is based on common law principles rather than statutory fairness tests. The focus is on whether the employment contract was breached and what financial loss resulted.

Can I claim wrongful dismissal under 2 years’ service?

Yes. There is no qualifying service requirement for wrongful dismissal. An employee can bring a claim from day one of employment if the employer breaches the contract when terminating employment, for example by failing to give contractual notice. This differs from most unfair dismissal claims, which usually require two years’ service.

What is the difference between wrongful and unfair dismissal?

Wrongful dismissal is a contractual claim based on breach of contract, typically concerning notice rights. Unfair dismissal is a statutory claim under the Employment Rights Act 1996 and concerns whether the employer had a fair reason and followed a fair procedure. Wrongful dismissal does not require two years’ service, whereas unfair dismissal usually does.

How much compensation can I receive for wrongful dismissal?

Compensation is limited to financial loss caused by the breach of contract. This usually means net salary and contractual benefits during the notice period that should have been given. In the Employment Tribunal, breach of contract claims are capped at £25,000, although there is no financial cap in the civil courts.

Is dismissal during probation wrongful dismissal?

Dismissal during probation is not automatically wrongful. However, if the employer fails to give contractual or statutory notice when required, and the employee has not committed a repudiatory breach justifying summary dismissal, the termination may amount to wrongful dismissal.

What are the remedies for wrongful dismissal?

The primary remedy is an award of damages for financial loss. There is no award for injury to feelings and no remedy of reinstatement. Damages are designed to compensate for lost notice pay or other contractual entitlements.

Can I claim both wrongful and unfair dismissal?

Yes, where the circumstances support both claims. For example, an employee may have been dismissed without notice and also unfairly dismissed. However, compensation cannot be duplicated for the same financial loss.

Conclusion

Wrongful dismissal is a contractual claim focused on whether an employer complied with the termination provisions of the employment contract. It is not concerned with fairness, reasonableness or procedure, but with strict contractual compliance. Most claims arise from failures to provide proper notice, unlawful summary dismissal or early termination of fixed-term contracts without contractual authority.

Unlike unfair dismissal, wrongful dismissal can be claimed from day one of employment and is not subject to a two-year qualifying service requirement. This makes it particularly relevant in probationary dismissals and short-service terminations, where employers may mistakenly assume that legal risk is limited.

Compensation is confined to financial loss flowing from the breach, typically notice pay and associated contractual benefits. While tribunal awards are capped at £25,000 for breach of contract claims, civil court proceedings may involve significantly higher exposure where lengthy notice periods or fixed-term contracts are involved.

For employers, the legal risk is usually technical rather than procedural. Careful review of notice clauses, valid payment in lieu provisions, proper assessment of alleged gross misconduct and clear drafting of fixed-term termination rights are central to avoiding liability.

A disciplined, contract-led approach to dismissal decisions remains the most effective safeguard against wrongful dismissal claims.

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