01.06.2026

Significant changes to the rules which apply to unfair dismissal are expected to take effect from 1 January 2027, and the impact of the reforms will be relevant for both existing employees and any new joiners from 1 July 2026 onwards.

Below we consider how HR can prepare, zooming in particularly on the effective management of probationary periods.

How will the rules around unfair dismissal change?

The following key changes are expected to take effect from 1 January 2027 under the Employment Rights Act 2025:

  1. The qualifying period (i.e. the length of time someone must have been employed before they can bring an ordinary unfair dismissal claim) will reduce from two years to six months, meaning that employees will be able to claim ordinary unfair dismissal as soon as they have six months of continuous employment. In practice this means that anyone with six months’ service on 1 January 2027 – including those on fixed term contracts – will gain unfair dismissal protection immediately, with others gaining it once they reach six months’ service. (Note that there will still be circumstances in which no qualifying period will apply, including for dismissals related to discrimination, whistleblowing and health and safety concerns, all of which are already protected from the first day of employment. Being dismissed for one of these reasons will continue to be automatically unfair.)
     
  2. In line with the change to the qualifying period, employers will need to give written reasons for dismissal to employees after six months of employment, rather than two years. (Employees who are dismissed while pregnant or during statutory maternity or adoption leave will still need to be given a written statement of reasons without having to request it, regardless of their length of service.)
     
  3. The cap which currently limits the unfair dismissal compensatory award will be removed. Currently this is capped at the lower of £123,543 or 52 weeks' actual pay (reviewed annually), but that cap will no longer apply in relation to any dismissal which takes effect on or after 1 January 2027.

These reforms will significantly increase the unfair dismissal related risks (and therefore likelihood of litigation) for employers from earlier in the employment relationship, so it is important for HR to get on the front-foot now by considering how best to prepare.

How can employers prepare?

Our Unfair Dismissal: Employment Rights Act Spotlight outlines some key considerations for employers, such as the importance of reviewing recruitment processes to ensure you are hiring the right people in the first place. We also set out some further thoughts below:

1. What length of probationary periods will you include in your contracts once these new rules come into force?

If you currently include a six-month probationary period in your template employment contracts, you may wish to consider reducing that timeframe; as, if not, by the time a new employee reaches the end of their probationary period they will have already acquired ordinary unfair dismissal protection.

In addition, bear in mind that employees with fewer than two years' service are entitled to a statutory minimum one-week notice period. Where no notice is given (or where the individual is paid in lieu of notice), a week must be added onto the date of dismissal when calculating the employee’s qualifying service. In practice, this means that if you want to dismiss someone before they reach the six months qualifying period, you will need to dismiss at least one week before they have gained six months’ service. Keep in mind too that it is often helpful, although not obligatory, to leave scope for the probationary period to be extended (for example, if the employee is on sick leave).

So what approach will your organisation take in the light of these types of considerations? Moving forwards, you might decide to opt for a four-month contractual probationary period for new starters. Although that approach gives a relatively short timeframe within which to assess an individual’s performance, it does leave scope for the probationary period to be extended by up to a month (if needed) before the six-month qualifying period kicks in. Alternatively, you might opt for a five-month probationary period depending on the role (perhaps leaving scope for the relevant manager/HR to hold two structured check-in meetings with the employee to see how they are getting on), but with no option to extend.

One size will not necessarily fit all, so you will need to decide which approach is most suitable for your business and the specific roles in question. It is also worth considering how any benefits (such as company sick pay) will be treated during the probationary period. Once you have decided on your preferred approach, template contracts, any probationary policy and your internal processes will need to be adjusted accordingly.

2. How will you tell your managers about these changes, and equip them to effectively manage probationary periods and/or any performance-related concerns?

Once the qualifying period for ordinary unfair dismissal reduces to six months, your managers will have less time to form a view on whether a new joiner is suitable for the role they have been employed to do before that individual acquires ordinary unfair dismissal protection. This means it will become increasingly important for your managers to rigorously manage performance issues during the probationary period, and they will need to keep unfair dismissal related risks front-of-mind.

Training for managers will therefore be key. Managers will need to understand the importance of holding regular, rigorous reviews with new hires during the probationary period, during which they will need to clearly set out for the employee the expected standards of performance and give constructive feedback regarding any performance concerns. If, for example, the employee needs support, that should be carefully documented in a written support plan.

Managers will also need to understand the importance of carefully documenting all matters relating to performance management in case the employee brings a tribunal claim. Notably, the impact of various changes under the Employment Rights Act, including the extension of time in which to bring a claim from three to six months (see Employment Tribunal Time Limits: Spotlight), mean that any tribunal hearing may not take place until many years after someone has been dismissed – by which time key personnel may have left the business. This means your HR documentation will need to be more watertight than ever.

3. What approach will you take to managing performance concerns and, where necessary, dismissals of senior employees?

Under the current unfair dismissal regime, exits of senior and high-earning employees tend to be handled relatively swiftly on a without prejudice basis, with the existing cap on the compensatory award setting useful parameters for the levels of unfair dismissal compensation that individual might expect to receive when they leave. But this will change for dismissals that take effect on or after 1 January 2027, as the compensation cap will no longer apply.

This means that many employers will need to rethink their approach to performance managing and dismissing senior/highly paid employees (and update their template contracts, any probationary policy and performance management policies/processes accordingly). If you do not currently include a probationary period in the contracts of your most senior/highly paid employees, you may wish to include one in all new contracts. It will also be advisable to document the reason for dismissal for all employees and to be able to show a clear paper trail of underperformance (including warnings and reviews), regardless of the seniority of the employee. For many organisations the changes to the unfair dismissal rules are likely to require something of a cultural shift, so it is wise to get ahead and start to prepare now.

How we can help

Make UK is on hand to support you preparing for all the changes under the Employment Rights Act. If you are a Make UK subscriber, you can speak with your adviser if you have any queries. You can also access detailed HR and employment law guidance and template policies in our HR & Legal Resources section, which will be maintained as changes under the Act come into force. And if you need hands-on support with any projects as you prepare for the changes, our HR and legal consultants can work with you to get the right steps in place and stay compliant. We can support with the following:

  • Recruitment process review: Reviewing your recruitment and pre-employment processes to help you make better hiring decisions and reduce the risk of early-stage dismissal claims.
     
  • Contract and probationary clause review: Strengthening template contracts and probationary clauses so they are clear, robust and aligned with the new six-month qualifying period.
     
  • Probationary period design and use: Helping you review or introduce probationary policies, including length, purpose, notice provisions and how they are applied in practice.
     
  • Manager capability and confidence: Supporting managers to actively manage performance, conduct and attendance during probation and early employment, delivered through one-to-one coaching with our HR consultants to build fair and robust decision-making or through targeted training such as:
     
  • Performance and conduct process support: Reviewing and improving performance, conduct and attendance procedures so concerns are addressed promptly and fairly within the first six months.
     
  • Early risk identification: Helping HR teams spot issues sooner and take proportionate action before problems escalate into claims.

If you haven’t yet done so, you can download our free Employment Rights Act Planner, and we can provide an Audit and Impact Assessment (a structured review to help you understand your levels of risk, prioritise actions and plan with confidence).

You may also be interested in our Employment Rights Act Knowledge Base (including Roadmap) and Employment Rights Act Training for Managers.

If you are not a Make UK subscriber, you can contact us for further support. Please click here for information on how we can help your business.