New unfair dismissal rules: preparing your business for 2027

The new unfair dismissal rules do not take effect until January 2027, but employers should already be preparing. Businesses that review probation periods, performance management and dismissal procedures now will be better placed to manage risk and adapt to one of the most significant employment law changes in recent years.

If your business is preparing for the new rules, contact our employment solicitors for practical advice on reviewing your contracts, policies and procedures.

Why employers should prepare now

There has been considerable discussion about employment law changes taking effect on 1 July 2026, particularly regarding unfair dismissal.

While the new unfair dismissal rules introduced by the Employment Rights Act 2025 do not come into force until 1 January 2027, 1 July 2026 marks an important practical milestone.

Employees who started work on or before 1 July 2026 will have completed six months' continuous service when the new legislation takes effect. As a result, many employers should already be reviewing their recruitment, probation and performance management processes rather than waiting until January.

What are the new unfair dismissal rules?

Under the current law, most employees must complete two years' continuous service before they can bring an ordinary unfair dismissal claim.

From 1 January 2027, the qualifying period will reduce to six months, allowing employees to gain protection against ordinary unfair dismissal much earlier in their employment.

The statutory cap on compensatory awards for ordinary unfair dismissal will also be removed, increasing the potential financial consequences of successful claims.

Although employers have always needed to consider day one rights, such as discrimination, whistleblowing and automatically unfair dismissal, the reduction in the qualifying period means ordinary unfair dismissal claims are likely to become a much more significant consideration during the first year of employment.

Why 1 July 2026 matters

An employee who started work on 1 July 2026 will have completed six months' service when the new unfair dismissal rules come into force on 1 January 2027.

That means employees recruited during the second half of 2026 could become eligible to bring an ordinary unfair dismissal claim almost immediately after the law changes take effect.

Employers that wait until January 2027 to review their HR procedures may find they have left themselves with little time to adapt.

How the changes affect probation periods

One of the biggest practical implications of the new unfair dismissal rules is the increased importance of probation periods.

Many employers have traditionally viewed the first two years of employment as the period in which they can assess whether a new recruit is the right fit for the business. Once the qualifying period is reduced to six months, those assessments will need to take place much earlier.

Regular probation review meetings, clear objectives and prompt action where concerns arise will become increasingly important.

Employers should also remember that statutory notice periods can sometimes affect an employee's qualifying service. Delaying a dismissal until the end of a probation period without taking advice could inadvertently allow an employee to qualify for unfair dismissal protection.

What should employers be doing now?

Preparing early can significantly reduce the risk of future employment disputes.

Employers should consider:

• Reviewing probation periods and employment contracts.
• Scheduling formal probation review meetings well before the six-month point.
• Training managers to identify and address performance concerns at an early stage.
• Keeping clear written records of meetings, objectives, support provided and any performance concerns.
• Ensuring employees understand what improvements are expected and are given a reasonable opportunity to achieve them.
• Reviewing disciplinary, capability and dismissal procedures to ensure they remain fit for purpose.
• Taking legal advice before dismissing employees who are approaching six months' continuous service.

Well-managed probation periods and good documentation have always been important. They are likely to become even more valuable once employees qualify for ordinary unfair dismissal protection after six months rather than two years.

Preparing your business for January 2027

Although the new unfair dismissal rules do not take effect until January 2027, the countdown has already begun.

Employers that review their employment practices now will be in a stronger position to manage probationary employees fairly, make informed employment decisions and reduce the likelihood of future claims.

Preparing in advance can also help businesses avoid costly disputes, minimise disruption and ensure managers understand their responsibilities before the new legislation comes into force.

Guidance from our employment solicitors

The upcoming changes represent one of the most significant reforms to unfair dismissal law in recent years.

Matthew Irvine, head of employment law, said:

"The new unfair dismissal rules will have a real impact on how employers manage probation periods and early employment decisions. Businesses that wait until the changes come into force may find they've left themselves with very little time to adapt. Reviewing documentation, strengthening management processes and seeking legal advice now will put employers in a much stronger position."

Our employment solicitors advise employers of all sizes on recruitment, employment contracts, probation periods, disciplinary procedures, dismissals and wider workplace issues.

If you would like advice on preparing your business for the new unfair dismissal rules, contact our employment law team.