Significant changes to UK employment law are coming in on 1st January 2027, and unfair dismissal rules are firmly in the spotlight.
If you are an employer, it’s important that you are preparing for a shift that will increase risk and scrutiny around dismissal decisions.
What’s changing?
Under the new Employment Rights Law 2025, the qualifying period for unfair dismissal claims will reduce to just six months from its current two-year threshold from the 1st January 2027.
This means employees will gain protection much earlier, and they will also have the right to request written reasons for dismissal. Consequently, individuals employed from now on will no longer need to wait two years to qualify for unfair dismissal claims.
In addition, upcoming reforms are going to remove the cap on compensation for unfair dismissal, creating potential unlimited financial exposure for employers.
The changes are coming into force from January 2027, but preparation should begin now.
What counts as unfair dismissal?
Before looking at the upcoming changes, it’s important to understand how unfair dismissal is defined under current UK law, as different rules can apply depending on the situation.
At present, employees generally need two years’ continuous service to bring a standard unfair dismissal claim. Once this threshold is met, a dismissal may be considered unfair if the employer cannot demonstrate both a valid reason and a fair process.
In simple terms, a dismissal is likely to be challenged if:
- there is no clear or lawful reason for ending the employment
- the reason given is not strong enough to justify dismissal
- the employer has failed to follow a fair and reasonable procedure
Employers are expected to act consistently, carry out appropriate investigations where necessary, allow employees to respond before any final decision is made and give them the right to appeal the decision.
Even where there is a potentially fair reason for dismissal, failing to follow a proper process can still result in a finding of unfair dismissal.
What should you do now?
To stay compliant and reduce the risk of unfair dismissal claims, employers MUST act early.
- Structure probation periods: Reduce probation periods to 3 months, supported by formal review points every 4 weeks. This structure ensures early identification of performance concerns and enables fair, well-supported decision-making before the deadline. Should performance remain uncertain, a 1 to 2-month extension may be granted while remaining safely within statutory time limits.
- Set performance objectives: Agree clear objectives and standards from day one, including regular check-ins and documented feedback.
- Review probation processes: Ensure probation periods are structured, documented and actively managed, not just a formality.
- Train managers: All line managers must understand the new unfair dismissal law and procedures, as well as how to evidence decisions.
- Audit contracts and policies: Update disciplinary, dismissal and probation policies to reflect the shorter three-month qualifying period.
- Document everything: Making decisions without a clear evidence trail will be far harder to defend under the new rules.
Why employers CANNOT afford to delay action!
In practical terms, the window for managing underperformance or cultural fit is shrinking.
Employers will need to treat dismissals in the first three months with the same level of care and process as they would for long-serving employees.
In our experience, most businesses will need to adapt processes, training and documentation to manage this earlier risk effectively.
Failing to prepare could have serious consequences, as earlier eligibility to bring claims and the potential for uncapped compensation mean even routine dismissals could lead to costly employment tribunal claims.
These reforms are designed to strengthen employee protections – and raise the bar for employers. The organisations that succeed will be those that embed fair, consistent and well-documented practices from the very start of employment.
If your current processes are not fit for purpose, now is the time to act!
Email hello@northernhr.co.uk today & get expert support and guidance to protect your business.