The impact of the changes to unfair dismissal under the Employment Rights Act are going to be felt much sooner than most employers realise.
The Government has now confirmed further details of the upcoming unfair dismissal reforms under the Employment Rights Act.
What’s changing from 01 January 2027?
Two major changes will come into force (there will be no consultation):
- The qualifying period to bring an unfair dismissal claim will reduce to just six months’ service (down from two years); and
- The compensation cap for unfair dismissal claims will be removed.
What’s the impact for employers?
You might be thinking “2027? We’ve got loads of time!”. Reality is, the clock starts ticking in 2026, particularly if you operate six-month probation periods.
Let’s break it down. If:
- An employee starts on 01 July 2026
- They reach six months’ service on 01 January 2027 – they gain unfair dismissal protection on this date.
“For someone who started on 1 July 2026, notice and statutory qualifying-service rules can bring the practical decision point forward. Check the actual dates and notice entitlement before making a dismissal decision.
Recruitment decisions may start even earlier – if you’re hiring for a July 2026 start date, and the candidate has a three-month notice period, you could be issuing offers as early as 01 April 2026. This means your risk profile for new hires changes from Spring 2026, not January 2027.
What should employers and HR teams be doing now?
Review current employees approaching six months’ service around January, alongside contracts and review arrangements for new hires:
Reviewing employment contracts – check probation clauses, extension mechanisms and notice drafting now to ensure enough time to make commercial decisions about changes and that you’re not drifting past the six-month qualifying point unintentionally.
Tighten probation management – train managers to set expectations early, hold structured reviews and address underperformance quickly. A “wait and see” approach will become a fast track to dismissal risk.
Strengthen recruitment and onboarding – introduce more robust assessment and onboarding processes now to reduce early performance issues later. Early prevention and better hiring decisions will be significantly cheaper than defending potential claims.
Reflecting on recruitment and resourcing – some employers may reconsider headcount growth or increase use of contractors or consultancy arrangements to remove the potential for unfair dismissal claims.
How can we help?
Whether it’s reviewing contracts, updating policies, training managers to drive performance, or discussing the impact these changes might have on your settlement strategy, we can help – get in touch.
This update is accurate on the date it was published but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
