How the Employment Rights Act is changing unfair dismissal

Review your probationary clauses and policies and how you recruit and manage new hires 

Situation before reforms under the Employment Rights Act 2025

Employees can only claim ordinary unfair dismissal if they have at least two years of continuous service with their employer.

There are exceptions for certain dismissals, including those related to discrimination, whistleblowing or health and safety concerns, all of which are already protected from the first day of employment. Being dismissed for one of these reasons is automatically unfair.  

If a tribunal upholds a claim of unfair dismissal, it may award the employee compensation, made up of: 

• a basic award (calculated by reference to the employee’s age, length of service and a ‘week’s pay’, capped as at 6 April 2026 at £751 and reviewed annually); and
• a compensatory award (capped as at 6 April 2026 at the lower of £123,543 or 52 weeks’ actual pay and reviewed annually). 

On request, employers must give written reasons for dismissal to employees with two years’ service (except where the dismissal takes place during pregnancy, maternity leave or adoption leave). 

So what’s changing and when?

The two-year qualifying period is being reduced to six months, meaning that employees will be able to claim ordinary unfair dismissal after six months of employment.

Employers will still have to establish a potentially fair reason for dismissal and show that they acted reasonably in all the circumstances (including following a fair process) when dismissing employees with more than six months’ service.

If requested, employers will need to give written reasons for dismissal to employees after six months of employment.

In addition, the Government is removing the cap on the compensatory award. 

The reforms are expected to take effect on 1 January 2027. Note that it is expected that employees who already have six months’ service will gain unfair dismissal protection from 1 January 2027 onwards, with others gaining it once they reach six months’ service. 

What you need to do

• Review your recruitment procedures to ensure that new hires are well-suited to your organisation and the role you have employed them to do. Tighten up your application, interview and pre-employment screening process to ensure thorough due diligence on incoming employees. The costs of getting it wrong will become higher.
• Review the template contract you use for new hires to make it as robust as possible.  
• Consider your current use of contractual probationary periods. Consider in particular:
  
  • their length
  • which roles you use them for
  • their purpose (for example: ensuring compatibility of a new hire with their role; disapplying certain HR policies; applying a shorter notice period; access to benefits etc.)
  • how effective they are currently. Do your managers proactively engage with probationary periods, for example properly managing performance/conduct/attendance during them?
• Review your probationary policy or, if you do not currently have such a policy, consider introducing one.
• Update your performance management/conduct/attendance management processes and train your managers. The changes will make it harder for you to dismiss employees after they have worked for you for six months (and the potential costs of unfair dismissal claims are rising), so you may want to make a decision about whether they are suitable within that timeframe. Do your managers need upskilling for this?

How Bhayani Law can support you

Whether you’re already working with us or exploring options for the first time, we can help you plan for the Employment Rights Act changes and protect your business.

Already getting support from Bhayani Law? 

You’ll receive updates from us as key legal changes come in, so you can stay compliant and up to date. 

Detailed HR and employment law guidance and template policies, and letters can also be found in the Watertight HR Hub.

If you’ve got questions or need advice, your dedicated advisor is on hand to help. They can arrange line manager training and reviews of your HR policies, such as those relating to recruitment, appraisal, performance management and disciplinary matters. 

Our HR and legal team can also provide hands-on support on any projects as you prepare for these changes. For example, we can help you analyse your training to make sure it’s adequate in respect of your new hires.

How we can help

The reduction of the unfair dismissal qualifying period will increase risk much earlier in the employment relationship. Employers will need stronger recruitment decisions, tighter probation management, and more consistent people processes from day one.

Our HR and legal experts can help you put the right structures in place, so issues are identified early and handled correctly. We can support you with:

• Recruitment process review: Reviewing your recruitment and pre-employment processes to help you make better hiring decisions and reduce the risk of early-stage dismissal claims.
• Contract and probationary clause review: Strengthening template contracts and probationary clauses so they are clear, robust and aligned with the new six-month qualifying period.
• Probationary period design and use: Helping you review or introduce probationary policies, including length, purpose, notice provisions and how they are applied in practice.
• Manager capability and confidence: Supporting managers to actively manage performance, conduct and attendance during probation and early employment, delivered through one-to-one coaching with our HR advisors to build fair and robust decision-making or through targeted training such as:
  
  • Recruitment & Selection
  • Managing Investigations
  • Managing Disciplinaries
  • Managing Underperformance
  • Optimising Performance through Probation, Appraisals and 121s
  • Managing Within Employment Law 
• Performance and conduct process support: Reviewing and improving performance, conduct and attendance procedures so concerns are addressed promptly and fairly within the first six months.
• Early risk identification: Helping HR teams spot issues sooner and take proportionate action before problems escalate into claims. 

New to Bhayani Law?

You don’t have to face the changes alone. Whether you need quick input or ongoing support, we can help you however works best for your business.