City Firms Rework Contracts Before £123,543 Dismissal Cap Ends
Updated
Updated · City A.M. · Aug 25
City Firms Rework Contracts Before £123,543 Dismissal Cap Ends
2 articles · Updated · City A.M. · Aug 25
Summary
City businesses are overhauling employment contracts ahead of January changes that will remove the £123,543-or-one-year-salary cap on unfair-dismissal compensation and cut the qualifying period for claims to six months.
Six-month probation periods are being shortened so employers can assess and, if needed, exit staff before they gain stronger dismissal rights, pushing HR teams to scrutinize performance earlier.
Non-compete clauses are also expected to weaken after a 2025 Department for Business and Trade consultation, with lawyers saying firms are preparing for them to be changed, curtailed or made ineffective.
Deferred bonuses, share incentive plans and gardening leave are emerging as the main retention and protection tools, while some companies already accelerated senior exits and redundancies before the cap disappears.