The Employment Rights Act 2025 is bringing some important changes to UK employment law, and one of the biggest for employers is still to come. From January 1 2027, the qualifying period for ordinary unfair dismissal claims is due to fall from two years to six months, along with the compensatory cap at employment tribunal being removed.

For HR teams and business owners, that is a big shift. It puts even more emphasis on onboarding people well, managing probationary periods effectively, having open performance conversations and making fair decisions from the very start of employment.

The steps you take now can help you build stronger, fairer people processes ahead of 2027. Here is a look at the changes in more detail and some of the ways we’re advising Shaw Gibbs clients to prepare.

What are the new unfair dismissal rules?

Unfair dismissal gives employees the right to challenge their dismissal at an employment tribunal if there was no fair reason for ending their employment, or if the employer failed to follow a fair process. Most employees need two years’ continuous service before they can bring that type of claim.

From January 1 2027, that qualifying period is expected to reduce from two years to just six months. That means employees will gain protection much earlier in their employment than they do now.

In practice, that gives you a shorter window to understand whether someone is settling into the role, address concerns early and support employees effectively before ordinary unfair dismissal rights apply. For many businesses, probationary periods and performance management will need reviewing.

Under the government’s planned approach, employees who already have six months’ service on January 1 2027 will gain protection immediately. That means employees hired from June 24 2026 could already fall within the new regime when it comes into force.

The financial implications are also changing. The current cap on compensatory awards for unfair dismissal is set to be removed. What was previously capped at £118,223 is now based on an employee’s actual and projected financial losses, which includes bonuses, salary and commission. You may want to take an even more careful and consistent approach to dismissal decisions, particularly for senior or highly paid employees, as compensation awarded in a tribunal case could amount to hundreds of thousands of pounds.

At the same time, you will face tighter restrictions on so-called “fire and rehire” practices. Dismissing employees because they refuse contractual changes is set to become automatically unfair except in very limited circumstances, reducing flexibility where businesses have previously relied on dismissal and re-engagement.

Some protections still apply from day one, and that is not changing. Employees will continue to have immediate protection in cases involving discrimination, pregnancy, whistleblowing and other automatically unfair reasons for dismissal.

In other words, once an employee has the required service, you will still need to show both a potentially fair reason for dismissal and that you acted reasonably in the circumstances by following a fair process.

What does this mean for employers?

For most employers, the first few months of employment are when you really get to know a new employee – how they are settling in, where they may need support and how they are growing into the role. That period has always mattered, but it is now going to matter even more.

A standard six-month probation period now sits almost exactly alongside the new qualifying period for unfair dismissal protection. That makes it even more important to check in regularly, give clear feedback and address any concerns in good time.

That means probation periods will need to be managed more actively. Reviews may need to happen earlier, concerns should be raised as soon as they appear, and managers will need clear evidence to support fair, well-informed decisions. Above all, a consistent and thoughtful approach will help people feel better supported throughout the process.

When these processes are in place, businesses are better equipped to support their people, make fair decisions and create a stronger experience for employees and managers.

How to prepare for the upcoming changes

The best preparation starts with strong, day-to-day people management. You should review how probation periods are structured, make sure conversations around performance, conduct or attendance are documented clearly, and ensure managers step in early to offer support and guidance where it is needed.

It is also a good time to review your policies, employment contracts and handbooks so they reflect the new legal landscape and support a consistent approach across the organisation. We offer a complementary review of handbooks and policies and can highlight where updates or improvements may be needed.

Refresher training can also make a real difference. Managers need to feel confident identifying issues early, documenting conversations properly and handling sensitive discussions in a fair, constructive and supportive way.

Taking these steps now will help you prepare for legal change and lead to clearer expectations, better conversations, stronger management practice and a more positive experience for your people overall.

Attend our upcoming webinar

If you would like to explore what these reforms mean in practice, we’d love for you to join our free webinar on June 3, from 10am to 11am.

Together with employment law experts Herrington Carmichael, we will talk through the changes in more detail and share practical steps you can take now to feel prepared and support your people well.

We will also cover the wider rollout of the Employment Rights Act, other changes you should be aware of, what HR teams and line managers may need to do differently, and practical scenarios to help you prepare with confidence.

You can register here and if you can’t attend you will be sent the slides and the recording.

If you have any questions in the meantime, please do get in touch with me or a member of the Reality HR team at info@realityhr.co.uk or call 01256 328428.