Senior bankers in London have good reason to fear the final quarter of 2026

If you are a senior banker or trader in London, 2026 could be a dangerous year for your job. It's not a lack of deals that's the issue. Nor is it AI. It's the coming change in UK employment law.

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From January 2027, the UK government is lifting the cap on compensation for unfair dismissal. Currently set at £118k, or 52 weeks' pay, the cap makes claiming unfair dismissal pointless for high earners.  In eight months' time, this will no longer be the case. As with successful discrimination and whistleblowing cases, a successful claim of unfair dismissal could then lead to multimillion pound compensation payments. 

“Before this change in the law, the typical advice to senior people in banks would be that an unfair dismissal claim without a whistleblowing or discrimination angle was not worth their while," says Caroline Field, a partner at Fox Lawyers in the City of London. "After this, the balance may change.”

Unfair dismissal is usually claimed as the result of procedural irregularities in a termination process as a result of which underperformance wasn't documented or proscribed redundancy procedures weren't adhered to. In the past it's not been uncommon for senior bankers to be tapped on the shoulder, taken aside and offered a settlement to disappear. "Historically a lot happened behind closed doors, where people would be told things weren’t working out and that it was time to move on rather than running a fair process,” says Field. 

From January 2027, this will no longer be so easy. Banks in London will need to put even their most senior people through standard performance processes in which targets are set and warnings given, or they will need to authentically restructure teams so that roles become redundant. 

If banks want to clear people out using the easier shoulder tap method, they may therefore choose the end of this year to do it. If not, they risk punitive compensation costs in employment tribunals. 

Lawyers caution that employment tribunals are not easy ride, however. "Just because the cap will become unlimited, it doesn't mean that employees will be able to justify huge settlements," says employment lawyer Philip Landau at Landau law. "But this will add leverage to employees' negotiations. High earners will be able to threaten employers with tribunals knowing there is no cap to potential damages." At the moment, a good severance package is usually considered to be six months' salary, says Landau. This could rise. 

Threatening or bringing unfair dismissal claims may be of most interest to senior bankers who lose their jobs and can't find new ones. Bringing a claim through the employment tribunal takes three to four years, cautions Field. If you find a new job during that time, your potential compensation may be reduced. 

All of this means that the end of 2026 could be a dangerous time for London bankers who aren't paying their way and who have little hope of finding new jobs if they're let go. "It's not in banks' interest to let go of productive people, but they may fast track exits when they already know that they want to remove a particular person from a position," says Landau.

You have been warned. 

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