Unfair dismissal reform: practical steps for employers in preparation for January 2027

From 1 January 2027, the qualifying period for bringing an ordinary unfair dismissal claim will be reduced from two years to six months. Additionally, the statutory cap on compensatory awards for unfair dismissal will be removed, increasing the potential financial exposure for employers.

These changes will fundamentally alter the way that employers assess and manage new recruits, placing much greater importance on how probationary periods are structured and used in practice.

What do these changes mean? 

Employees who already have six months’ service on 1 January 2027 will be able to bring an ordinary unfair dismissal claim from that date. This means that employees engaged on or before 1 July 2026 will have the requisite service by 1 January 2027. Employees engaged after that date will acquire ordinary unfair dismissal protection once they reach six months’ service.

This change relates to ordinary unfair dismissal only. Employees will continue to have day-one protection where no minimum period of service is required, for discrimination claims or for automatically unfair dismissal claims, including dismissals connected with whistleblowing, pregnancy or family leave.

Probation is not a legal “safe period”

Many employers currently use a six-month probation period, while also relying on the existing two-year qualifying period as a wider timeframe for assessing suitability of new employees. Once the qualifying period is reduced to six months, employers will no longer have that additional buffer.

A probationary period should therefore be treated as an active management tool during the early stages of employment. It should be used to set expectations, monitor performance and conduct, provide feedback, identify concerns and decide whether employment should continue before the employee reaches six months’ service.

A probationary period will not, of itself, protect an employer from an ordinary unfair dismissal claim once the employee has acquired the necessary service. If dismissal takes place after that point, the employer will need to establish a potentially fair reason for dismissal and show that it acted reasonably in treating that reason as sufficient, including by following an appropriate process.

Employers should therefore avoid treating probation as a passive period which ends with a single meeting shortly before expiry. To be effective, probation should be structured, actively managed and supported by proportionate written records.

Why acting at the end of the probationary period may be too late

Employers should also factor statutory notice into their probation timetables. An employee with at least one month’s service is generally entitled to one week’s statutory minimum notice. When calculating qualifying service for an unfair dismissal claim, that statutory notice period may be added to the employee’s service, even if the employer dismisses with immediate effect and makes a payment in lieu of notice.

In practical terms, a decision taken close to the six-month mark may not prevent the employee from acquiring unfair dismissal protection. Employers should therefore build sufficient headroom into their probation processes, rather than waiting until the final days of the probationary period.

We recommend that employers review whether their current arrangements allow enough time to assess performance, provide support, investigate concerns and take a reasoned decision before the qualifying period is reached.

For example, employers may wish to consider an initial three or four month probationary period, with a contractual right to extend for up to a further one month where appropriate. Any extension should be permitted by the employment contract, communicated before the original probationary period expires, and accompanied by clear objectives, support and a further review date.

Managers will play a key role

Probationary processes will only be effective if managers use them consistently and deal with concerns promptly.

At the start of employment, managers should ensure that the employee understands their role, the standards expected of them and how their performance will be assessed. Review meetings should take place at regular intervals, with proportionate written records kept of feedback, agreed support and any areas for improvement. Concerns should be raised clearly and promptly, rather than left until the final review.

Where dismissal is being considered, employers should check whether any additional risk factors are present, including sickness absence, disability, pregnancy, family leave, whistleblowing, trade union activity or the exercise of another statutory right. A short period of service will not prevent claims that do not require a qualifying period.

What should employers do now?

• Audit employment contracts to check whether probationary periods are appropriately framed, including whether there is a contractual right to extend.
• Consider whether a three or four month initial probationary period, with the option to extend, would provide sufficient time to assess suitability before six months’ service is reached.
• Introduce structured review points and diary reminders so that probation meetings are not missed or left until the end of the probationary period.
• Require managers to set clear objectives, give regular feedback and keep proportionate written records from the start of employment.
• Train managers on probationary dismissals, discrimination, automatically unfair dismissal and when HR or legal advice should be obtained.

Review employees who will already have six months’ service on 1 January 2027, rather than focusing only on future hires

How we can help

If you would like assistance reviewing your probation clauses, policies or processes ahead of the changes, our employment team are here to support you. Get in touch today to discuss how we can assist you.