Pub & Bar: Unfair dismissal reform: what pubs and bars need to prepare for now

The passage of the Employment Rights Act heralds a major change to unfair dismissal laws. In this article, Charlie Rae, Employment Partner at TLT reviews the likely impact on the Pub & Bar sector.

Major changes to unfair dismissal laws are on the horizon, and pub and bar operators should start planning well in advance for that change. Following Royal Assent of the Employment Rights Act 2025, new rules concerning unfair dismissal take effect from 1 January 2027, significantly expanding employees’ rights and increasing risk for employers, particularly in sectors such as hospitality, which are highly people focussed.

While 2027 may feel some way off, operators will need to start focussing in on their recruitment and management practices to help manage some of the risk areas.

A shorter qualifying period and more claims

The most eye catching change to the various employment law developments being introduced by the Government is the reduction in the qualifying period for unfair dismissal. From January 2027, employees will gain protection after six months’ service (including service accrued prior to that date), replacing the current two-year threshold.

Across the economy, an estimated 6.3 million additional workers will gain the right to bring an unfair dismissal claim. For pubs and bars, where staff turnover is often high and many roles are filled by newer employees, the impact could be significant.

The compensation cap is going

Alongside the shorter qualifying period, the statutory cap on unfair dismissal compensation will be removed entirely. At present, awards are limited to the lower of one year’s pay or £118,223. From 2027, tribunals will instead be able to award compensation reflecting an employee’s actual financial losses.

For hospitality operators, this raises the stakes. Dismissals that are rushed, poorly documented or inconsistent with internal procedures could become far more expensive, particularly where employees struggle to find alternative work.

Pressure on tribunals and a shift in behaviour

The reforms are expected to lead to an increase in claims, especially when combined with longer tribunal time limits and extended Acas early conciliation. Employment tribunals are already under strain, and delays are likely to worsen.

As a result, many employers may look to resolve disputes earlier through settlement or mediation, rather than allowing issues to escalate. For pub and bar businesses, this may mean rethinking how grievances, performance concerns and conduct issues are handled during the first few months of employment.

Rethinking recruitment and probation

Recruitment and probationary processes are likely to come under closer scrutiny. Stronger pre-employment checks, clearer job expectations and more structured probation reviews will become increasingly important.

Operators may also need to review how probation periods are managed in practice. Clear feedback, documented reviews and timely decisions will be key. There is a risk that some businesses respond defensively by dismissing staff before six months or relying more heavily on fixed term or casual arrangements – an approach that carries its own risks, both legally and reputationally.

What should pub and bar operators do now?

While the government does not expect typical unfair dismissal compensation awards to rise dramatically, the direction of travel is clear. Employers will need to ensure fair processes from an earlier stage of employment.

Practical steps include investing in manager training, tightening up record keeping, and ensuring policies are followed consistently on the ground. Performance or conduct issues should be addressed promptly, particularly during probation, with clear evidence of discussions and decisions.

For an industry built on people, preparation now will be essential to avoid costly disputes later.

Q&A

Iwant to apply for a pavement license to make the most of improving weather –what do I need to consider?

 “The process requires, as a minimum, a scale plan showing the area to be used, including the number of tables and chairs, distances to any street furniture (lamp posts, bus stops) and the curb, a copy of your public liability insurance, and an identified ‘reasonable provision’ of a non-smoking area depending on the size of the area to be licensed. Each authority can then ask for further information, such as photos of the types of furniture. Your local authority will have guidance on their exact requirements. Allow for a minimum 15 days but it can take a month, so apply sooner rather than later!”

 Read more from Pub & Bar's April 2025 issue: Pub & Bar - Magazine

This article was first published in Pub & Bar

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