Introduced in the Employment Rights Act 2025 (ERA), one of the flagship policies significantly reduces the qualifying period for legal protection against unfair dismissal.
This change represents one of the most significant reforms to workplace protections in decades and will likely have sweeping impacts on UK employers.
The Government argues this policy will reduce one-sided flexibility in the workplace and increase job security for employees, benefitting millions of people.
Understanding the changes can allow your business to stay compliant and reduce the risk of compensation claims.
What do the changes mean?
Under current legislation, employees need two years’ continuous service before they can claim compensation for unfair dismissal.
From 1 January 2027, this qualifying period for protection will drop to six months.
While the changes are yet to come into force, any employee hired after 1 January 2025 will have a shortened qualifying period.
For example, a worker starting on 1 January 2026 will only have a year until they gain full protections from unfair dismissal and those starting after 1 July 2026 will only need the minimum six months.
Aside from the shortened qualifying period, unfair dismissal tribunals will also not be limited to an upper threshold for compensation awards.
Where unfair dismissal compensation is currently the lower of £123,543 or 52 weeks’ pay, the monetary cap on tribunal compensation will be removed.
However, this doesn’t automatically mean substantial compensation rewards will be won in every single case, as compensation still must be ‘just and equitable’.
How should businesses respond?
The ERA should be a top consideration for employers who are currently planning to expand their workforce or have done so since 1 January 2025.
A top priority should be putting the processes in place to ensure organisational fit and performance is fully assessed in advance of the six-month threshold.
Auditing start dates of employees can account for new hires who will already have six months service when new regime comes into force.
This involves reviewing contracts and probationary periods, making sure they reflect ERA deadlines before starting the recruitment process.
Any evaluation of an employee’s suitability should be thoroughly recorded throughout their probationary period, including any feedback and support provided.
The standard industry advice is that probation periods should now be four months long, with a final decision made by the end of month five.
Any final decisions made beyond this point risk tipping over the six-month threshold.
This would mean an employee would have gained full unfair dismissal protection, which may make any decisions about suitability being more difficult and costly to defend.
Managers should also be trained on how to give direct feedback and handle underperformance immediately, keeping clear records of reviews and warnings.
You should also consider how the effective date of termination might overlap with an employee being granted full protection from unfair dismissal.
For example, a worker could be half a week away from reaching the qualifying period, but then told their contract is being terminated.
The statutory minimum notice will likely bring their termination date over the six-month mark, allowing them to submit an ordinary unfair dismissal claim.
How can a legal professional help?
By reaching out to one of our legal experts, we can perform an employment law audit to identify risks to your business that the ERA might bring.
We can review contracts to make sure probationary periods fall within the six-month mark and performance management procedures are up to date.
Any dismissal procedures will be double-checked, ensuring your business handles underperformance and conduct issues compliantly.
Speaking to a solicitor early can give your business time to update policies that might avoid costly compensation claims in the future.
Is your business prepared for the changes to unfair dismissal? Get in contact with our team for a comprehensive employment law audit.
