Unfair dismissal reform: what employers need to know before January 2027

For employers, this means earlier exposure to claims, greater financial risk and less room for informal or delayed decision-making.

Although the changes do not come into force until next year, the practical impact is already being felt. Any employees who were recruited on, or before, 1 July 2026 will reach six months’ service by 1 January 2027 and so will benefit from the new protection. Therefore, recruitment, probation and early-stage performance management decisions made now may fall within the new regime.

Where are we now?

At present, employees generally need two years’ continuous service before they can bring an ordinary unfair dismissal claim. There are important exceptions: certain claims, including dismissals connected with discrimination, whistleblowing, health and safety activities, pregnancy or other automatically unfair reasons, do not require two years’ service.

What is changing?

The key change is simple but significant: the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months.

From 1 January 2027, employees with at least six months’ continuous service will be able to bring an ordinary unfair dismissal claim. This will apply to existing employees as well as new starters. For example, an employee who starts work on 1 July 2026 will have six months’ service by the time the new regime comes into force.

Employers will still need to show a potentially fair reason for dismissal, such as conduct, capability, redundancy, statutory restriction or some other substantial reason, and that they acted reasonably in all the circumstances. In practice, that usually means following a fair and properly documented process.

The  ERA is also removing the statutory cap on compensatory awards (currently the lower of £123,543 or 52 weeks’ gross pay) and so will increase the risk profile of unfair dismissal claims, particularly for senior or higher-paid employees. Compensation will still be based on actual and projected loss, but the absence of a cap will make some claims more valuable, more difficult to settle and more expensive to defend.

There is also an earlier Employment Tribunal deadline change to factor in. From 1 October 2026, the time limit for bringing most Employment Tribunal claims will double from three months less one day to six months less one day from the relevant act or, in dismissal cases, the termination date. In practice, employees will have longer to notify Acas for Early Conciliation and preserve their ability to bring a claim.

What should employers do now?

Employers should use the lead-in period to stress-test the whole employee lifecycle, from hiring through to exit.

1. Review recruitment practices: with a shorter window before unfair dismissal protection applies, hiring decisions need to be more robust. Job descriptions, interview notes, selection criteria and reference checks should support the decision to recruit and help identify risk early.
2. Tighten probation procedures: probation periods should be actively managed, with clear objectives, regular review points and timely decisions. Employers should avoid letting probation drift beyond the six-month point without a documented assessment of performance, conduct and suitability.
3. Train managers: managers will need to identify issues early, keep accurate records and understand when a formal process is required. Consistency will be key, particularly where performance, conduct, absence or redundancy decisions are being made within the first year of employment.

Next steps

These reforms will make early employment decisions more important and increase the consequences of getting dismissal processes wrong. Employers who wait until January 2027 to prepare may already be too late.

Now is the time to review contracts, probation clauses, manager training and dismissal procedures. Taking those steps before the new regime comes into force will help reduce risk, improve consistency and put businesses in a stronger position when handling difficult employment decisions.

If you would like support preparing for these changes, our employment team can help you identify the key risk areas and put practical protections in place. Our HR Protect service provides clients with unlimited day to day HR and Employment Law Advice, delivered by award winning and experienced specialist solicitors, for a fixed monthly fee.

Find out more here: https://hrprotect.wardhadaway.com/