What dismissing someone the wrong way actually costs you

 

Support to help you understand the real risks of getting dismissals wrong under new employment law changes.

As a small business owner, you've probably let someone go before without giving the process much thought.

That used to be fairly low risk. It isn't any more.

New employment law changes mean employees can challenge a dismissal much sooner, and the amount they could be awarded is about to become uncapped.

If you haven't updated how you handle exits, you're exposed.

Here's what you need to know and what to do about it.

What should you actually be doing right now?

Before we get into the detail of what's changing, let's start with the practical stuff. Because if you're running a business that's grown quickly and relies on informal processes, this is where the risk sits.

Your employment contracts need checking. Specifically, do your probation clauses reflect the new reality? Are the terms clear on what happens during and at the end of probation?

Your disciplinary and grievance procedures need to be up to date ahead of 1st January 2027. If they've been sitting in a drawer since you first set the business up, they're unlikely to hold up if challenged.

Beyond that, ask yourself:

• Are probation reviews actually taking place, or do they just exist on paper?
• When a manager has a concern about someone's performance, is it being written down?
• Are warnings and feedback being formally recorded?
• Do your managers know what a fair process looks like when it comes to ending someone's employment?

The first six months of employment now carry far more weight. Anyone you hire from 1 July 2026 onwards will have unfair dismissal protection much earlier than before. How you onboard, manage and review new starters matters enormously.

Myth: you had two years to decide if someone was right for the role

That used to be true. The qualifying period for unfair dismissal was two years, which gave businesses a long window to assess new hires and part ways informally if things didn't work out.

That window is shrinking to six months.

If you take someone on from 1 July 2026, they'll be eligible to bring an unfair dismissal claim once the new rules kick in from January 2027. That's a massive shift in how much time you have to make decisions about new employees.

Myth: the payout from a tribunal is manageable

Right now, there's a cap on what a tribunal can award for most unfair dismissal cases. From January 2027, that cap is being removed.

The financial exposure from a poorly handled dismissal becomes open-ended. And it's worth remembering that tribunals don't just look at whether your decision to dismiss was reasonable. They look very closely at the process you followed to reach that decision.

Myth: only disgruntled employees cause problems

The Fair Work Agency launched in April this year. It gives employees another route to raise complaints and seek protection. But it also has the power to audit your records and processes proactively, without waiting for someone to make a complaint first.

So even if none of your employees are unhappy, your processes could still come under scrutiny.

The mistakes that get businesses into trouble

I see the same patterns coming up again and again when a dismissal goes wrong. And they're almost always avoidable.

One of the biggest is a lack of documentation. If you've had conversations about someone's performance but never put anything in writing, you'll struggle to defend your decision at a tribunal. It doesn't matter how reasonable the dismissal felt at the time.

Another common issue is inconsistency. If two employees behave in a similar way but one gets a warning and the other gets dismissed, that's going to raise questions.

Managers making snap decisions under pressure is another one. Emotional or rushed calls, especially without following a proper procedure, leave you wide open.

And then there's the situation where someone is dismissed for something that was never formally raised with them. No prior feedback, no documented concerns, just a sudden exit. That's very difficult to defend.

The costs you might not have thought about

When people think about the cost of getting a dismissal wrong, they tend to think about the tribunal payout. But that's only part of it.

Consider the management time involved. Pulling together evidence, preparing for hearings, attending them. It takes hours and hours away from running your business.

Then there's the impact on the rest of your team. Morale drops when people see a colleague dismissed badly. It makes them wonder whether they could be next, and it affects how they feel about working for you.

Your reputation takes a hit too. Word gets around, especially in local areas, and it can make it harder to attract good people in the future.

Some businesses end up settling claims they believe were fair simply because they can't produce the paperwork to back up their position. That's a frustrating and expensive outcome that proper documentation would have prevented.

Questions worth asking yourself

If you're not sure where you stand, these are worth thinking about:

• If you dismissed someone tomorrow, could you produce written records showing the issue was raised with them beforehand?
• Do your managers understand what steps they need to follow before letting someone go?
• Have you reviewed your contracts and policies in the last 12 months?
• Is your probation process structured enough to withstand external scrutiny?
• Are you confident that similar situations are being handled consistently across your team?

If the answer to any of those is no, or even "I'm not sure", it's worth getting some support in place now rather than waiting until something goes wrong.

How HR consultancy services in Thanet can help

A good HR consultant looks at your dismissal process before you're in the middle of a difficult situation. That means reviewing your documentation, checking your investigation steps and looking at how decisions are made to spot the gaps that would cause problems if challenged.

If you're already dealing with a tricky situation, having the right support means you can handle it properly without making things worse.

Let's have a conversation

If you've recently let someone go and you're not confident the process was watertight, or if you're thinking about dismissing someone and want to make sure you get it right, get in touch.

As an outsourced HR consultant in Thanet, I can take a look at where you are now and tell you honestly whether your process would hold up.

We'll have a quick chat, I'll give you a straight answer, and we'll work out what needs to happen next.

No pressure, just practical advice when you need it.