UK’s £123,543 executive dismissal cap may now exceed France, Spain and Germany

From 1 January 2026 the UK removes its £118,000 unfair‑dismissal ceiling and sets a new statutory cap of £123,543 – a level that, according to City AM, could make senior‑executive redundancy more costly than in the three biggest EU economies.

Trainers List · 18 Sep 2026

The UK government’s Employment Rights Bill received Royal Assent in December 2025 and removed the long‑standing £118,000 cap on unfair‑dismissal compensation. The legislation came into force on 1 January 2026, raising the statutory ceiling to £123,543 – equivalent to one year’s pay for an executive. City AM reports that this new figure could make dismissing a senior executive in the United Kingdom more expensive than doing so in France, Spain or Germany for the first time.

Background to the Employment Rights Bill

The Employment Rights Bill was introduced to modernise workers’ protections and to address concerns raised by the House of Lords about the adequacy of ‘day‑one rights’. As part of the package, the government scrapped the previous £118,000 cap on unfair‑dismissal compensation. The removal was framed as a response to union pressure and a move to align the UK’s employment framework with contemporary expectations of fair treatment.

According to the packet, the timeline of the reform is clear:

• December 2025 – the Bill receives Royal Assent and formally eliminates the £118,000 limit.
• 1 January 2026 – the new statutory cap of £123,543 becomes effective.

The change is described in City AM’s article titled “Why it could now cost more to sack an executive in the UK than FRANCE”. The piece notes that the cap increase is “equivalent to one year’s pay” for an executive, a phrasing that the bill itself uses.

The new statutory cap

City AM states the precise figure: “From January, the unfair dismissal compensation cap will be £123,543, or one year’s pay.” The source also records the previous ceiling of £118,000, highlighting the £5,543 rise. The new cap applies to all unfair‑dismissal claims that meet the statutory test, meaning senior managers who are dismissed without a fair reason could be entitled to a lump‑sum payment up to that amount.

Legal commentator Caspar Glyn KC, speaking at City AM’s Breakfast Briefing, reinforced the comparative significance of the change. He said:

“for the first time, dismissing someone in the UK could be more expensive than dismissing someone in Spain, France, and Germany.”

How the UK compares with continental peers

City AM provides illustrative caps for France, Spain and Germany, expressed in British pounds for easy comparison. Although the figures are described as “approximate” and based on typical statutory limits, they give a clear sense of the relative scale.

Source: City AM article (quoted figures for EU countries are illustrative based on typical statutory limits).

The table shows that the UK cap exceeds each of the three EU caps by between £1,543 and £13,543. The difference, while modest in absolute terms, is symbolically important because it marks the first statutory ceiling in the UK that overtakes its European counterparts.

Implications for employers and executives

For UK businesses, the higher ceiling translates into a larger potential liability when terminating senior staff. Companies that previously modelled redundancy costs on the £118,000 limit will need to adjust their budgeting and risk‑management frameworks. The change also aligns the UK’s statutory exposure with the “one‑year pay” benchmark used in many European jurisdictions, albeit at a slightly higher level.

Executives themselves may find the new cap reassuring, as it guarantees a more generous safety net in the event of an unfair dismissal. However, the increase could also fuel negotiations around severance packages, with senior managers potentially seeking higher contractual terms that exceed the statutory minimum.

From a policy perspective, the shift raises questions about competitive parity. While the UK now faces a higher statutory cost, it also retains flexibility in other areas of employment law, such as notice periods and contractual freedom. The net effect on cross‑border hiring and retention strategies remains to be seen.

What remains unknown, as the packet notes, is the exact statutory ceiling in each EU country beyond the illustrative figures. City AM’s table explicitly labels the French, Spanish and German caps as “approximate”. Without official government data for those jurisdictions, the comparison rests on typical limits rather than definitive statutory amounts.

Nevertheless, the core claim – that dismissing an executive in the UK could now be more expensive than in France, Spain or Germany – is directly supported by the City AM article and the quoted statement from Caspar Glyn KC.

Looking ahead

Employers are already revisiting executive contracts in light of the new exposure. Human‑resources teams are expected to update redundancy calculators, and legal advisers are likely to advise on mitigation strategies, such as enhanced performance‑management processes or alternative dispute‑resolution mechanisms.

Future research could track whether the higher cap influences executive turnover rates or alters the attractiveness of the UK as a location for senior talent. For now, the statutory change stands as a clear, measurable shift in the cost of executive dismissal, marking a new chapter in the UK’s employment‑rights landscape.