30/09/2026
Ninety-five paragraphs and no cap: the draft Acas Code meets the new dismissal regime
For many employers, the greatest impact of the Employment Rights Act will be felt from 1 January 2027, when two significant changes to employee rights come into force:
the reduction of the unfair dismissal qualifying period from two years to six months; and
the removal of the cap on the compensatory award for unfair dismissal.
Separately, and more immediately, on 30 July 2026 Acas published a draft Code of Practice on disciplinary and grievance procedures to replace the 2015 Code. The draft Code was the subject of a public consultation, which closed on 23 September 2026.
Developments of this nature are typically considered in separate briefings. However, when viewed together, they have the potential to reshape employer risk in a way that neither would do in isolation.
The arithmetic will change
Under section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992, a tribunal may adjust an award by up to 25 per cent where a party has unreasonably failed to comply with the Code. At present, that percentage is applied to a capped figure; but from 1 January 2027, it will be applied to a compensatory award with no ceiling.
Consider a senior clinician earning £120,000 who remains out of work for two years despite actively trying to obtain new employment. Because the compensatory award reflects net loss, two years without work produces a base award of roughly £152,000. Today, that figure is largely academic. The award is capped at the lower of £123,543 or 52 weeks’ gross pay, which for this employee is £120,000. The cap is doing two things at once. First, it disregards £32,000 of actual loss. Second, it renders a 25 per cent uplift for unreasonable failure to follow the Code worth precisely nothing, because the base award alone already exceeds the ceiling. This employee recovers £120,000 whether the employer followed the Code or ignored it entirely.
From 1 January 2027, there will be no cap. The base award of £152,000 stands in full, and a maximum uplift adds a further £38,000, taking recovery from £120,000 to £190,000. Of that £70,000 increase, £32,000 follows from the legislation and is outside the employer’s control. The remaining £38,000 is the price of the procedural failure, and it is the part an employer can influence.
The £38,000 is a ceiling rather than an expectation, and it will be subject to the tribunal’s discretion. Even so, procedural compliance is now an essential factor for any employer weighing its potential financial exposure, regardless of an employee’s salary.
More paragraphs, more places to fail
The existing Code runs to 47 paragraphs across two subject areas. The new draft expands this to 95 paragraphs across ten subjects. Three of those expansions carry particular risk.
Informal resolution moves from the foreword into the body of the Code. This change is not simply stylistic, it bears direct correlation to potential financial liability. Material in the foreword does not form part of the Code and so cannot give rise to an uplift, whereas the body of the Code can. Under the draft, a failure to consider informal resolution where it was appropriate is squarely within scope.
New express Equality Act obligations, including reasonable adjustments during the process. The current Code does not mention the Equality Act at all. A failure to make adjustments during a disciplinary process has always risked a discrimination claim, but under the draft, will it also risk an uplift?
The written invitation to a formal disciplinary meeting must record what informal steps were taken, or why none were (there are carve outs). That is a documentary requirement on the face of the Code, and it is the first document a claimant’s representative will examine.
The gap that matters most
Nothing in the draft Code scales by length of service. Paragraph 3 preserves the allowance for employer size and resources, and paragraph 5 excludes redundancy dismissals and the non-renewal of fixed-term contracts. Length of service appears nowhere as a mitigating factor.
The consequence is straightforward. From 1 January 2027, an employee dismissed for poor performance at seven months’ service has unfair dismissal protection, and the process leading to that dismissal is measured against the same 95-paragraph framework as one applied to an employee with fifteen years’ service. The draft offers no lighter-touch route for short-service or probationary dismissals, even though this is the single most predictable consequence of the reduced qualifying period.
Worker status
Throughout, the draft uses “worker” in place of “employee”, yet the uplift mechanism does not apply to worker status uniformly across all claims. The result is a mismatch: the Code addresses its standard practice to a wide population, but the legal remedies for breach do not extend to all of them in the same way. For organisations, such as health care employers, that operate substantial bank, agency and sessional workforces, this potentially creates a real risk Acas has expressly invited views on whether this terminology carries unintended consequences.
Ten practical steps for employers
Seven steps that will be needed whatever the final Code says
Model your exposure on the post-January basis: an uncapped compensatory award, plus a discretionary uplift of up to 25 per cent applied to the whole of the award.
Run a gap analysis of existing disciplinary and grievance policies against the new draft Code. Identify what is missing rather than rewriting text.
Review how suspension decisions are made and recorded, written justification is required against defined grounds in every case.
Introduce a standing enquiry about reasonable adjustments at the outset of every formal process.
Establish who within the organisation holds mediation accreditation, and commission training where that capability is absent.
Train managers to hold and record informal resolution conversations, and to recognise when informal resolution is not appropriate.
Reassess how short-service and probationary dismissals are handled, on the basis that no lighter-touch route exists.
Three steps to hold in reserve until the Code is final
Policy redrafting and terminology changes. The consultation has asked whether the Code should be renamed and whether the use of “worker” carries unintended consequences, so the language may yet move.
Amendments to disciplinary invitation templates, including the requirement to record what informal steps were taken or why none were.
Look out for the Government response and the final Code so that a scheduled policy review is built into the compliance calendar.
Employment law 2026 – keeping you and your organisation up to date
There have been a number of notable developments since July’s edition of Employment Eye - below is a short recap on some of those developments.
4 August 2026 – University of Bristol v Miller
The Employment Appeal Tribunal held that the dismissal of professor for expressing anti-Zionist beliefs was directly discriminatory and unfair.
5 August 2026 – Updated Equality and Human Rights Commission Services Code of Practice
The updated Code was published and came into force on the same day.
12 August 2026 – Augustine v Data Cars Ltd
The Supreme Court unanimously allowed the appeal and held that the correct test under Reg 5(2) Part Time Worker Regulations is the "effective cause" test, not the "solely because" test. The phrase "on the ground that" has a long, well-established meaning across UK discrimination law: a protected characteristic need only be a significant or effective cause of the treatment, never the sole one.
25 August 2026 – Employment Rights Act 2025
New rules under the Employment Rights Act 2026 introduced electronic and workplace balloting for statutory trade union ballots.
7 September 2026 – Employer guidance on supporting menstrual and menopausal health
The British Standards Institution and the International Organization for Standardization have published a new global standard providing guidance to employers on supporting menstrual and menopausal health in the workplace. The standard builds on the guidance previously set out in the BSI's 2023 UK standard.
8 September 2026 – ABC v Huntercombe (No.12) Ltd and ors
The Court held that a transferor's vicarious liability to a third party for its employees' wrongdoing does not pass to the transferee under TUPE.
15 September 2026 – The Employment Rights Act 2025
The Government published its response to the consultation on flexible working. There will be a focus on communication, with employers being required to consider alternatives when a request cannot be accommodated. Refusals must also be reasonable, providing tribunals with more room to scrutinise decisions. There is also be a new structured process, which will be set out in the forthcoming regulations. Acas guidance is expected by the end of 2026. The changes are expected to come into force in autumn 2027.
17 September 2026 - Hancox v Sutherland and others
The Employment Appeal Tribunal has issued guidance on how litigants, particularly litigants in person, should use generative AI when preparing documents for courts and tribunals. The EAT held that submitting generative AI output without checking it, or placing the checking onus on another party, is not acceptable. Where concerns arise that necessary checks were not undertaken, or were conducted inadequately, judicial enquiries and potential sanctions are likely to ensue.
What matters to you, matters to us — follow our LinkedIn page for legal insights that matter.
