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

What is the current situation?

Employees can currently 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 2025 at £719 and reviewed annually); and
• a compensatory award (capped as at 6 April 2025 at the lower of £118,223 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

The precise timing of these steps will depend on when the detailed legislation is finalised and when the changes take effect. However, employers can begin preparing now:

• Review your recruitment processes to ensure new hires are well matched to both the role and your organisation. Consider strengthening application, interview and pre-employment screening procedures. The cost of a poor recruitment decision is likely to increase.

• Review your standard employment contracts to ensure they are as robust as possible for new starters.

• Reassess your use of probationary periods, including:

  • their length;

  • which roles they apply to;

  • their purpose (for example, assessing suitability, limiting access to certain policies or benefits, or applying a shorter notice period); and

  • how effectively they are currently managed.
    Are managers actively using probation periods to address performance, conduct or attendance issues?

• Review your probationary policy, or consider introducing one if you do not already have one in place.

• Update your performance, conduct and attendance management processes, and provide appropriate training for managers. As dismissals after six months’ service will become more legally risky, and potential compensation higher, it will be increasingly important to identify and address suitability issues early. Consider whether your managers need additional support or upskilling to do this effectively.

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.

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.