We have been following the progress of the Employment Rights Act 2025 (ERA) closely and have published a series of blogs highlighting the key changes of which employers need to be aware. As these reforms move closer to implementation, this latest update looks at the forthcoming changes to unfair dismissal rights and why 1 July 2026 represents a hidden milestone for employers.
Upcoming changes
Although the changes to unfair dismissal rights introduced by the ERA will not take effect until 1 January 2027, you’d be wrong to wait around to do anything by then.
At the time of writing this blog, your employees need two years’ continuous service before they obtain unfair dismissal protection. From 1 January 2027, they will only need six months!
This means that employees hired on or before 1 July 2026 will enjoy unfair dismissal protections from the new year, if they remain employed on that date.
The ERA also removes the statutory cap on compensatory awards for unfair dismissal claims. You may be exposed to much higher claim values, particularly where your employee was a high earner.
The six-month rule explained
You should be aware that the new qualifying period is not quite a full six months in practice. The dismissal must have taken effect within the 6-month period i.e. notice must have expired within that period; it’s not enough to have just served the notice.
If you are edging closer to that limit or there isn’t time for notice to be served, you can opt to pay in lieu of notice and give effect to termination straight away. However, in that situation, the law allows the employee to tag on the statutory minimum notice period of one week to notionally extend their leave date by one week.
The impact? Your employees will essentially gain unfair dismissal protection after five months and three weeks of service from 1 January 2027.
Steps for employers
From 1 July 2026, if you haven’t already, you need to begin preparing for the new unfair dismissal regime. Our top tips include:
- Ensure a robust recruitment process. Investing time beforehand and conducting thorough pre-employment checks can save a lot of hassle later. Follow up on references and ask appropriate questions in interviews.
- Set out clear expectations for new employees from the outset. Clear job descriptions and targets are crucial.
- Address concerns promptly and document them properly.
- Probationary periods have a purpose! They are useful tools to assess whether the employee is a good match for both you and the role. Reduce probationary periods for new starters to provide a sufficient window to make decisions before the six-month period. Three months is ideal. Don’t go beyond five!
- Train your leaders! Managers taking probationary review meetings and those who have a say in whether an employee is dismissed need to receive proper training with subsequent refreshers to tackle performance, conduct and suitability issues at the earliest opportunity. They need to be aware of these crucial changes before they happen.
The takeaways?
If you are contemplating dismissing an employee, you need to be alert to these changes.
If any employee with under two years’ service isn’t making the grade, tackling it now will likely be easier than in 2027!
Pop a note in your diary to revisit this every month between now and then; and don’t leave it too late to do something about it. December is busy and it will be easy to get things wrong. Not only that but employees have lots of tools at their disposal to thwart your plans, not to mention that your internal team and external advisors might well be taking Christmas leave. We recommend making tough decisions sooner, rather than later.
Need to discuss a particular issue? Feel free to give us a call.
