Continuing Our Commitment to Responsible Business
The Government has confirmed that significant changes to unfair dismissal rights will come into force on 1 January 2027.
From this date, employees will only need six months’ service to bring an ordinary unfair dismissal claim, rather than the current two years. The current cap on the compensatory award for unfair dismissal will also be removed, which could increase the financial risk for employers where dismissals are not handled properly.
Although January 2027 may feel some way off, this is not something employers should leave until the last minute. The changes will affect how businesses recruit, onboard, manage probation periods and make decisions about employees with shorter service.
When Will the New Rules Apply?
The key date is not when someone starts employment, but their Effective Date of Termination, often referred to as the EDT.
The new rules will apply where the EDT falls on or after 1 January 2027. This means the changes will not only apply to people hired after that date. They may also apply to existing employees, provided they have at least six months’ service when their employment ends.
For example, if someone joins your business in July 2026 and is dismissed in February 2027, they may have the right to bring an ordinary unfair dismissal claim. Likewise, an employee who joined well before 2027 could also fall under the new rules if their termination date is on or after 1 January 2027.
Employers should also be mindful of notice periods. If a dismissal decision is made before 1 January 2027, but the employee’s termination date falls on or after that date because of statutory or contractual notice, the new rules may still apply.
Why This Matters for Employers
For many years, employers have been used to having greater flexibility when managing employees with less than two years’ service. While day-one rights such as protection from discrimination, whistleblowing and automatically unfair dismissal have always applied, many short-service dismissals carried less unfair dismissal risk. That position is changing.
Once the qualifying period reduces to six months, employers will need to be much more careful about how they manage early employment concerns. This does not mean businesses cannot dismiss employees who are unsuitable, underperforming or not the right fit. However, it does mean employers will need to show that decisions were reasonable, evidenced and handled fairly.
Probation Periods Will Become Even More Important
Probation periods are already a useful tool for employers, but from 2027 they will become even more important.
A probation period gives both the employer and employee time to assess whether the role is right. It allows managers to set expectations, review performance, identify training needs and address concerns early. However, simply having a probation clause in a contract will not be enough.
Employers should make sure probation periods are actively managed, rather than only being discussed at the end of the probationary period. A good probation process should include:
Clear expectations from the start
Regular check-ins and review meetings
Honest feedback where there are concerns
Support, training or guidance where needed
Written records of conversations and decisions
A clear outcome at the end of the probation period
This does not need to be overly complicated, but it does need to be consistent.
What Should Employers Do Now?
The first step is to review your employment contracts. Any probation period should be clearly set out, including how long it lasts, whether it can be extended, what notice applies during probation and what process will be followed.
It is also worth reviewing your offer letters, onboarding documents and probation templates. If your business currently has a probation clause but no structured review process, now is the time to fix that.
Managers will also need support. In many SMEs, line managers are responsible for day-to-day feedback and probation reviews, but may not have had training on how to manage these conversations. They need to understand how to raise concerns early, document issues properly and avoid leaving difficult conversations until it is too late.
Practical Steps to Take Before January 2027
Before the changes come into force, employers should consider:
Reviewing contracts and probation clauses
Introducing or updating a probation policy
Creating simple probation review forms
Training managers on probation and difficult conversations
Auditing employees who will reach six months’ service by January 2027
Reviewing notice periods and dismissal processes
These steps will help reduce risk and create a better experience for employees and managers.
Although further guidance is expected from the Department for Business and Trade, employers should not wait before taking action. The businesses that prepare now will be in a stronger position when the changes take effect. They will also have better onboarding, clearer expectations and more confident managers, which can only be a good thing.
How Haus of HR Can Help
At Haus of HR, we can help you prepare for the upcoming unfair dismissal changes by reviewing your contracts, probation clauses, policies and manager processes.
We can also provide practical probation templates, manager guidance and training to help your business manage early employment concerns fairly and confidently.
If you would like to understand how prepared your business is for the 2027 changes, get in touch with Haus of HR for a confidential conversation.
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