The removal of the unfair dismissal compensation cap is changing how boards, lawyers, and claimants approach risk. This materially changes the financial exposure attached to senior-level disputes and increases the scrutiny placed on how dismissal decisions are made, documented, and defended.
The Institute of Employment Rights (IER) confirmed that the government will remove the cap on unfair dismissal compensation, currently at £118k or a year’s pay if it’s lower, from 1st January 2027. The removal of the upper limit on compensation awards in unfair dismissal claims opens the door for tribunals to award damages aligned more closely with actual loss rather than a capped figure.
This increases financial uncertainty for employers and places greater emphasis on preparation, process, and defensibility in dismissal decisions. For boards, legal advisers, and claimants, the direction is clear. When financial exposure rises, the value of credible, independent expert evidence rises with it.
This is where expert witness services, particularly those grounded in real executive market experience, are moving from niche support to a core component of high-stakes employment disputes.
Why This Change Matters at the Senior Level
Unfair dismissal claims have always carried financial and reputational risk. The removal of the compensation cap changes the scale of that risk, particularly for senior executives.
At the board and C-suite level, compensation packages are materially higher. Losses linked to dismissal can include salary, bonus, long-term incentives, share schemes, and future earnings potential. Without a cap, tribunals have a greater scope to consider the full financial impact. According to the government’s economic analysis of the legislation, higher-earning employees are among the groups that may particularly benefit from the removal of the compensation cap.
This introduces two immediate consequences:
- Higher-value disputes become more common
- Greater focus is placed on how decisions align with market practice
Senior dismissals are rarely straightforward. They often sit at the intersection of performance, conduct, governance, and commercial pressure. In many cases, the legal question isn’t simply whether a dismissal occurred, but whether it was reasonable, proportionate, and consistent with accepted executive-level norms. That isn’t always something internal documentation can answer convincingly.
The Growing Role of Expert Witness Evidence
As exposure increases, disputes are becoming more common and dependent on independent expert interpretation. Government data shows that at the end of the second quarter of the 2025-26 financial year, there were over 500,000 open Employment Tribunal cases. Tribunals and settlement negotiations place weight on evidence that explains how similar situations are typically handled across comparable organisations. This includes:
- What constitutes a reasonable process at the board level
- Where the line sits between performance and misconduct
- How executive contracts and incentives are normally structured
- Whether dismissal decisions align with market norms
Novo’s Expert Witness Services are built around this requirement with a focus grounded in evidence-based opinion drawn from active, current engagement with the executive marketplace and real boardroom practice across sectors. Typical outputs include:
- Independent expert reports
- Formal written witness statements
- Market benchmarking analysis
- Clear opinion on alignment with accepted executive practice
This type of evidence is increasingly used not only in tribunal proceedings, but earlier in the dispute cycle, particularly during mediation and settlement discussions.
Market Practice Is Becoming the Battleground
One of the consistent themes across senior disputes is the interpretation of “market practice.” Contracts, policies, and internal processes provide a framework, but at the executive level, decisions are often shaped by context, judgment, and commercial pressure, creating ambiguity.
The removal of the compensation cap amplifies this issue. When potential awards increase, both sides place greater emphasis on demonstrating whether actions were consistent with how similar organisations operate. This is where expert evidence becomes decisive, and Novo’s recent casework illustrates how these questions play out in practice.
Case Insight: Financial Services – Gross Misconduct Dismissal
Novo was instructed by a top 10 global law firm in a dispute involving alleged gross misconduct by a senior executive within a European financial services group.
The complexity wasn’t unusual for the sector. Financial services operate under intense regulatory scrutiny, where expectations around conduct and accountability are high, yet often open to interpretation.
The core issue centred on whether the executive’s actions constituted misconduct or reflected judgment under pressure. Novo assessed comparable cases, governance frameworks, and board-level decision-making across regulated markets. The resulting expert report and witness statement clarified the distinction between conduct failure and executive judgment.
The evidence was relied upon during settlement discussions, strengthening the client’s position and contributing to the resolution without a full trial. This type of distinction becomes more valuable in a post-cap environment, where financial stakes are higher, and nuance matters more.
Case Insight: Manufacturing – Wrongful Dismissal
In a UK manufacturing dispute involving a divisional managing director, the issue was less about conduct and more about process. Manufacturing environments often operate under shifting performance expectations, cost pressure, and organisational change. This can blur the line between underperformance and structural adjustment.
Novo reviewed the recruitment process, role definition, and internal governance, benchmarking against comparable UK and European leadership appointments.
The expert report identified inconsistencies between the expected and actual processes. This created leverage during mediation and supported a commercially favourable resolution.
As compensation exposure increases, procedural fairness is likely to face greater scrutiny, particularly where senior roles are concerned.
Case Insight: Infrastructure – Accident and Accountability
In an infrastructure case involving a serious workplace incident, the question centred on executive accountability. Complex reporting structures and layered operational models make it difficult to define where responsibility sits at the senior level.
Novo’s analysis focused on leadership oversight, safety governance, and industry benchmarks. The resulting evidence clarified the distinction between executive responsibility and operational control. This helped shape a more balanced legal position and informed settlement discussions. Defining accountability with precision becomes critical in a higher-exposure environment.
Case Insight: Technology – Post-Acquisition Compensation
In a cross-border technology dispute involving deferred compensation, the issue was alignment with market norms. Earn-out structures, retention incentives, and performance conditions vary widely, particularly between the UK and US markets.
Novo examined comparable transactions and incentive frameworks, identifying a clear divergence from typical practice. This strengthened the claimant’s position and supported a negotiated settlement. With the removal of the compensation cap, disputes involving executive reward structures are likely to increase in both frequency and value.
Why Boards Need to Rethink Dismissal Decisions
The regulatory change is now a legal and governance issue. Boards are now operating in an environment where financial exposure linked to dismissal is less predictable, decisions are more likely to be challenged, and external scrutiny of process and judgment is increasing. This requires a more disciplined approach to senior employment decisions.
Key considerations include:
- Clarity of process – Decisions should align with documented procedures and be consistently applied.
- Evidence of reasoning – Boards should be able to demonstrate how conclusions were reached, particularly in complex or borderline cases.
- Understanding of market norms – Internal views aren’t always sufficient. External benchmarking strengthens defensibility.
- Early use of expert input – In high-risk cases, involving expert perspective earlier can shape strategy, not only support litigation.
In addition to creating new disputes on its own, the cap’s removal also increases the consequences of getting existing ones wrong.
Interim vs Reactive Expert Involvement
A notable shift in this space is when expert witness support is engaged. Historically, experts were often brought in late, once proceedings were underway. That model is changing, with law firms and clients increasingly using expert input earlier in the process to:
- Assess the strength of a claim or defence
- Inform negotiation strategy
- Support mediation
- Reduce the likelihood of escalation
This earlier involvement often leads to faster, more commercially grounded resolutions. From a search and advisory perspective, it reflects a broader trend where organisations don’t wait for disputes to fully develop before seeking specialist input.
Novo’s Perspective
The removal of the unfair dismissal compensation cap is a structural change with practical consequences. It increases financial exposure, raises the stakes in senior disputes, and places greater emphasis on how decisions are made, not only what decisions are made.
In this environment, the interpretation of market practice becomes more important. Boards, legal advisers, and claimants need credible, independent insight into how executive decisions are typically handled across comparable organisations. Expert witness services provide that clarity, and Novo’s approach is grounded in real executive experience, structured analysis, and evidence that stands up under scrutiny.
The objective is to provide a clear, balanced opinion that helps decision-makers understand where actions align with accepted practice and where they don’t. As employment disputes evolve, the quality of that insight will play an increasingly central role in shaping outcomes.
If you’re working on a complex employment dispute, we will be pleased to discuss how we can support you.
