How can employers prepare for the upcoming unfair dismissal reforms?

The Employment Rights Act 2025 introduces major reforms to unfair dismissal law from 1 January 2027. From that date, employees with six months’ continuous service will be protected from being unfairly dismissed and, the statutory cap on compensation will be removed. In addition to that the time limit for bringing a claim will increase from three months to six months. 

For employers, this is a significant shift. Unfair dismissal risk will arise much earlier in the employment relationship, tribunal awards will potentially be higher, and businesses will need to manage probation, performance or conduct concerns and dismissal decisions much more carefully than before. 

This guide explains what is changing, how the new rules will affect probationary periods and early-stage dismissals, and what employers should be doing now to prepare. If you need advice on reviewing your contracts, probation processes, policies or dismissal procedures ahead of the reforms, our employment law solicitors can help. 

What is the current law on unfair dismissal? 

Under the current law, an employee must usually have two years’ continuous service before they can bring a claim for ordinary unfair dismissal in the employment tribunal. A few unusual types of automatically unfair dismissal claims do not require a particular length of service but in general, two years is required.  

Many employers have historically approached the first two years of employment with fewer concerns and employees have found themselves dismissed for all sorts of reasons, or sometimes no reason at all. Provided the employer avoids discriminatory or otherwise unlawful reasons, there is little that an employee can do about that. 

That position is about to change. From 1 January 2027, the qualifying period for ordinary unfair dismissal will reduce from two years to six months’ continuous service.  

This will significantly reduce the window in which employers can manage exits with lower unfair dismissal risk, and it will make robust probation and early performance management far more important. 

How are unfair dismissal laws changing?

From 1 January 2027

The key unfair dismissal reforms include the following: 

1. The qualifying period will reduce to six months 

From 1 January 2027, employees with at least six months’ continuous service will be protected from ordinary unfair dismissal. 

This means employers will need to be in a position to identify concerns, manage them fairly and make dismissal decisions much earlier in the employment relationship. 

2. Employees will be able to request written reasons for dismissal 

Employees who have reached the new six-month qualifying period will also have the right to request written reasons for dismissal. 

That makes clear documentation and a defensible rationale for dismissal even more important. 

3. The cap on unfair dismissal compensation will be removed 

At present, compensation for ordinary unfair dismissal is subject to a statutory cap on the compensatory award, which is currently the lower of £123,543 or 52 weeks’ gross pay. 

From 1 January 2027, that cap will be removed, meaning compensation for financial loss in unfair dismissal cases will be uncapped. This will apply to any case where the effective date of termination falls on or after 1 January 2027. 

This is a major change for employers. It increases both the potential value of claims and the financial risk associated with dismissals, particularly in cases involving higher earners or employees who may face longer periods out of work. 

Anticipated on 1 October 2026 

4. The time limit for claims will increase to six months 

The time limit for bringing an unfair dismissal claim will also increase from three months to six months from the date of termination. This is likely to happen on 1 October 2026 although the regulations to confirm that are still awaited.  

This gives employees longer to bring claims and means employers may be dealing with uncertainty, evidence issues and fading witness recollection over a longer period. 

Which dismissal claims can already be brought from day one? 

Although ordinary unfair dismissal will require six months’ service from 1 January 2027, some dismissal-related claims do not require any minimum period of service and can be brought whenever employment ends.  

These include dismissals connected with: 

• discrimination, for example, because of pregnancy, race, disability, sex, age, religion or belief, or other protected characteristics 

• whistleblowing 

• certain health and safety reasons 

• trade union activities 

• asserting a statutory right 

• other automatically unfair reasons 

While the ordinary unfair dismissal qualifying period is reducing to six months, employers should remember that dismissal decisions can already carry legal risk from the outset in some circumstances. 

How will the new six-month continuous service requirement affect probationary periods? 

For many employers, this will be one of the most important practical consequences of the reforms. 

A probationary period is a contractual tool, not a statutory exemption from unfair dismissal law. Once an employee reaches the qualifying period for ordinary unfair dismissal, they may bring a claim whether or not they are still described as being “on probation”. 

That means employers should not assume that having a six-month probation period automatically protects them. 

Probation periods may need to be reviewed 

Many employers currently use probation periods of six months, sometimes with only limited formal review during that period. Under the new regime, that approach may be too slow. 

If concerns about performance, conduct or suitability are not identified and addressed early enough, the employee may acquire unfair dismissal protection before a decision is made. 

In practice, many employers may want to consider: 

• whether probation periods should be shorter, for example three or four months 

• whether contracts clearly allow probation to be extended 

• whether managers are carrying out structured probation reviews in good time 

• whether dismissal decisions are being made early enough, with clear evidence and rationale 

Timing will matter more 

Employers will need to make decisions in good time before the six-month point. Leaving concerns unresolved until the end of a long probation period will create much greater risk. 

This is particularly important because notice can affect the legal position in some cases and can have the result that the ‘effective date of termination’ (is the date used to calculate whether an employee has the required length of service) is later than the date that the employee was dismissed. It’s particularly important to take legal advice if the employer is thinking about dismissing someone who is close to accruing the required level of continuous service, so that the risk of this happening can be minimised. Employers should not leave decisions until the last minute if they want to avoid arguments that the employee had already reached the qualifying threshold. 

There will be less scope for informal exits Many SMEs currently rely on relatively informal early-stage exits where a new hire is “not the right fit”. Once the changes take effect, the time available to take that step will be significantly reduced, meaning that employers will need to take decisions about an employee’s suitability much more quickly than they perhaps do at the moment. 

What should employers be doing to prepare for the unfair dismissal changes? 

The most important message for employers is do not wait until late 2026. 

Businesses should be reviewing their approach now, particularly if they are recruiting in 2026. 

1. Identify who will be affected first 

Anyone employed on or before 1 July 2026 will already have completed six months’ continuous service by 1 January 2027. That means they will automatically benefit from the new protection once the reforms take effect. 

Employers should identify: 

• new starters already in the business 

• employees due to start before 1 July 2026 

• any current concerns about those individuals 

• whether performance, conduct or capability issues are already emerging 

2. Review employment contracts 

Check whether contracts: 

• include a clear probation clause 

• set out the length of probation 

• allow probation to be extended 

• provide for an appropriate notice period during probation 

It may also be sensible to consider whether the length of the probation period should be reviewed and reduced given the new six-month unfair dismissal qualifying period.  

3. Introduce structured probation reviews 

Probation should not be allowed to drift. 

Employers should consider formal review points during the first few months of employment, with documented discussions around: 

• performance 

• conduct 

• attendance 

• training needs 

• support required 

• whether the employee is meeting expected standards 

Managers should be clear about what improvement is needed and by when. 

4. Train managers to act earlier 

Line managers will need to identify and escalate issues much earlier than many currently do. 

Training should cover: 

• how to manage probation properly 

• how to distinguish conduct from capability issues 

• how to give feedback clearly and fairly 

• when to escalate concerns to HR or legal advisers 

• how to document concerns and decisions 

This will be particularly important for SMEs where informal management styles have often worked in the first two years of employment, but where the scope for similar styles will be much reduced once unfair dismissal protection applies after six months. 

5. Improve documentation 

Written records will matter more than ever. 

Employers should keep clear records of: 

• probation meetings 

• concerns raised 

• support and training offered 

• improvement targets 

• decisions to confirm or extend probation 

• reasons for dismissal 

This will help employers explain and defend decisions, particularly where employees are entitled to request written reasons for dismissal and have longer to bring a claim. 

6. Review dismissal procedures and templates 

Policies, procedures and template letters should be updated so they reflect the new risk profile of early dismissals. 

Employers should review: 

• probation policies 

• capability and performance procedures 

• disciplinary procedures 

• dismissal letters 

• appeal processes 

• internal guidance for managers 

Even if a full formal process is not required in every early-stage dismissal, the decision should still be fair, reasoned and well documented. 

7. Take advice earlier in more cases 

Employers should consider taking legal advice sooner where: 

• an employee is close to six months’ service 

• the dismissal reason may overlap with discrimination, sickness absence, pregnancy, family leave or whistleblowing 

• there is uncertainty about process 

• there is a risk of a higher-value claim because of salary or seniority 

With uncapped compensation and a longer tribunal time limit, early advice may help avoid a much more expensive dispute later. 

Key dates and transition points 

1 July 2026 

Employees engaged on or before this date are likely to have six months’ continuous service by the time the reforms take effect. 

Expected 1 October 2026 

The time limit to bring employment tribunal proceedings will be extended from three months to six months. 

1 January 2027 

The unfair dismissal reforms take effect. From this date: 

• ordinary unfair dismissal protection applies after six months’ continuous service 

• eligible employees can request written reasons for dismissal 

• the statutory cap on unfair dismissal compensation is removed 

Summary 

The Employment Rights Act 2025 will significantly change how employers manage the first six months of employment. From 1 October 2026 (an anticipated date) employees will have longer to bring claims. 

From 1 January 2027, employees with six months’ continuous service will be protected from ordinary unfair dismissal and the cap on compensation will be removed. For employers, that means earlier unfair dismissal risk, potentially higher awards and much greater importance on getting probation and early-stage management right. 

The businesses best placed for these changes will be those that act early - by reviewing contracts, updating probation processes, training managers and identifying issues before employees reach the new qualifying threshold. 

If your business would like support reviewing probation clauses, updating policies or preparing for the unfair dismissal reforms, our employment law solicitors can help.