If you employ people in Great Britain, the rules on unfair dismissal are changing, and some of the change has already happened. Here is a plain-English guide to what is changing, when, and what it means for your business.
What is changing, and why
The Employment Rights Act 2025 received Royal Assent on 18 December 2025. Early proposals promised a full “day one” right to claim unfair dismissal, but the final Act settled on a six-month threshold instead. Here is how the three headline changes work.
Change one
The qualifying period drops from two years to six months
Until now, an employee needed two years’ continuous service before they could claim ordinary unfair dismissal. From 1 January 2027, that falls to six months. The same change applies to constructive dismissal claims and to the right to ask for written reasons for a dismissal. The qualifying period for unfair dismissal connected with spent convictions is removed altogether.
The test looks at the effective date of termination. If that date is on or after 1 January 2027 and the employee has six months’ continuous service, they can claim.
Watch out
Statutory notice can be added to the termination date when counting service, so a dismissal that looks safely inside the six months may not be.
Change two
The compensation cap is removed
At the moment, the compensatory award is limited to the lower of 52 weeks’ gross pay or a statutory maximum (£123,543 since April 2026). For dismissals with an effective date of termination on or after 1 January 2027, both limits disappear. A tribunal will award what it considers just and equitable to cover the employee’s actual financial losses. The basic award is not affected.
Change three
Employees get six months to bring a claim
For most tribunal claims, the time limit was three months (less a day) from the act complained of. From 1 October 2026, it is six months (less a day). This covers unfair dismissal, discrimination, whistleblowing and unlawful deductions from wages, and further regulations extend the same six months to breach of contract claims in the tribunal.
The new limit applies where the act complained of happens on or after 1 October 2026. Anything that happened wholly before that date stays on the old three-month limit, so the change does not revive claims that are already out of time.
What does not change: protections that apply from day one, such as discrimination and most automatically unfair dismissals, carry on exactly as before.
Key dates
- 18 December 2025 Employment Rights Act 2025 receives Royal Assent
- 26 May 2026 Commencement regulations confirm the 1 January 2027 start for the unfair dismissal changes
- 1 July 2026 Anyone employed on or before this date will have six months’ service by 1 January 2027
- 1 October 2026 Time limit for most tribunal claims rises from three to six months In force
- 1 January 2027 Six-month qualifying period and removal of the compensation cap take effect
In practical terms, almost everyone currently on your payroll, and everyone hired up to the end of June 2026, will be protected from the very first day the new rules apply.
What this means for your business
Probation periods offer less cover
There is no statutory probation period, and a contractual one does not stop a claim once six months’ service is reached. If you run a three-month probation with a three-month extension, it now ends at the exact moment protection begins.
Fair reason and fair process matter earlier
After six months you will normally need a potentially fair reason (capability, conduct, redundancy and so on), a reasonable investigation and a fair procedure. Informal, undocumented decisions that were low-risk for newer starters become real exposure.
The financial risk is bigger
With no cap, awards for senior or highly paid employees, or people who will struggle to find comparable work, could be far above today’s maximum. Tribunals can still reduce an award where a fair process would have led to the same outcome (known as a Polkey reduction), but that is a fallback, not a plan.
Claims can arrive later
Put the six-month service rule and the six-month time limit together and an employee dismissed in early January 2027 could still be bringing a claim into the summer of 2027. That means keeping records for longer and being ready for claims to surface well after someone has left.
Employer impact
Expect more claims overall. More employees will be eligible, with longer to decide, so be prepared for more claims, more settlement conversations and more management time spent defending decisions.
Your practical checklist
The start date is only weeks away, but these steps are manageable.
- Review contracts and probation clauses so your review points fall well before the six-month mark.
- Support your managers. Early, honest and documented feedback in the first weeks is the single most effective protection.
- Update your policies on disciplinary, capability and dismissal to reflect that the full process applies from six months.
- Check live cases. If anyone is already in a performance or conduct process, decide how to handle it before 1 January.
- Mind notice periods and take advice before dismissing anyone close to the six-month point.
- Plan for senior roles by reviewing contract terms, exit routes and settlement approaches in light of uncapped exposure.
- Keep your records longer. With six months to claim, hold performance notes, investigation papers and decision records for at least that long after employment ends.
How we can help
At Flo HR Consultant, we help UK businesses turn changes in the law into practical, workable HR processes: updating contracts and policies, building probation review frameworks, and coaching managers to handle difficult conversations fairly and confidently. If you would like a review of your dismissal documents before 1 January 2027, we would love to hear from you.
This article provides general information only and is not legal advice. Employment law is changing and individual circumstances vary, so please take specific advice before making decisions on a dismissal.
Sources: Lewis Silkin, Mishcon de Reya, Brightmine, MFMac, SE Solicitors