Dismissals are among the most challenging aspects of being an employer. Done correctly, they maintain standards and protect your business. Done incorrectly, they open the door to costly unfair dismissal claims.

Unfair dismissal is one of the most common claims brought before Employment Tribunals in the UK. Compensation can run into tens of thousands of pounds, and reputational damage can be severe.

This guide explains how employers can lawfully dismiss employees, avoid common pitfalls, and defend claims effectively.

Under the Employment Rights Act 1996, dismissal is unfair if the employer does not have:

1. A fair reason for dismissal, and

2. Follow a fair procedure in carrying it out.

Employees must usually have two years’ continuous service to bring a claim, but there are exceptions (see automatically unfair dismissals).

The law recognises five potentially fair reasons:

1. Conduct – Misconduct, including dishonesty, violence, or breaches of company rules.

2. Capability – Poor performance or ill health preventing the employee from fulfilling their role.

3. Redundancy – As outlined in Guide 2.

4. Statutory restriction – Where continued employment would breach the law (e.g., a driver losing their licence).

5. Some other substantial reason (SOSR) – Catch-all category, such as business reorganisation or irreconcilable conflicts.

Some dismissals are automatically unfair, regardless of procedure or length of service. These include dismissals connected to:

• Pregnancy and maternity

• Whistleblowing

• Health and safety concerns

• Trade union membership or activity

• Asserting statutory rights (e.g., requesting flexible working)

Even with a fair reason, dismissals must follow a fair process. Employers should:

1. Investigate thoroughly – Gather evidence before deciding.

2. Inform the employee – Outline allegations or reasons clearly.

3. Hold a hearing – Allow the employee to state their case.

4. Offer representation – Permit a colleague or union rep to attend.

5. Allow appeal – Give the employee the right to challenge the decision.

Failure to follow this process risks a successful claim, even if the dismissal reason is fair.

1. Skipping warnings – Dismissing for poor performance without first issuing warnings and offering support.

2. Inconsistent treatment – Disciplining one employee harshly while overlooking similar misconduct by others.

3. Lack of documentation – Verbal warnings or informal processes rarely hold up in tribunal.

4. Acting too quickly – Rushing to dismiss without investigation.

5. Failing to consider alternatives – Especially relevant for ill health or capability dismissals.

If an employee claims unfair dismissal, they will file with an Employment Tribunal within three months of termination.

The tribunal will examine:

• Was the dismissal for a fair reason?

• Did the employer follow a fair process?

• Was the decision reasonable in the circumstances?

If the claim succeeds, remedies may include:

• Reinstatement – Employee returns to role.

• Re-engagement – Employee takes a different role.

• Compensation – Basic award (based on redundancy formula) plus compensatory award (loss of earnings, capped but often substantial).

A retail employer dismissed a manager for poor sales performance without investigation or warnings. The tribunal ruled this was procedurally unfair, despite evidence of underperformance. The employee was awarded £35,000 compensation.

This demonstrates that procedure is just as important as reason.

• Keep detailed records of warnings, investigations, and hearings.

• Demonstrate consistency across staff.

• Show that alternatives (redeployment, training, adjustments) were considered.

• Seek legal advice before dismissal and as soon as a claim is received.

• Maintain up-to-date disciplinary and capability policies.

• Train managers in handling misconduct and performance issues.

• Conduct regular HR audits to ensure compliance.

• Use settlement agreements where appropriate to resolve disputes cleanly.

Dismissals are sometimes necessary, but they are legally fraught. Employers who act fairly, consistently, and transparently are far less likely to face successful claims.

At Manak, we support employers through the entire dismissal process — from investigations and hearings to defending tribunal claims. Our guidance reduces risk, protects your reputation, and ensures you remain compliant with employment law.

Speak to our employment law specialists today for tailored dismissal advice.