Unfair Changes to Unfair Dismissal Under the Employment Rights Act 2025 

What is changing in unfair dismissal from 2026 and 2027?

The upcoming changes to unfair dismissal under the Employment Rights Act 2025will significantly reshape how employers manage recruitment, probation, performance issues, and dismissal decisions. From late 2026 and 2027, the qualifying period for unfair dismissal will reduce to six months, the cap on compensatory awards will be removed, and employees will have more time to bring claims.

These changes increase the level of risk for employers because more employees will be protected earlier, claims may carry higher financial exposure, and disputes could be brought many months after an incident.

For HR professionals, this means existing processes may no longer provide the same level of protection. Recruitment decisions will need to be more robust, probation periods will require closer and more consistent management, and dismissal procedures will need to be applied carefully in every case, regardless of length of service.

Employers may also need to prepare for higher volumes of early conciliation notifications, longer tribunal timelines, and an increased administrative burden linked to record keeping and documentation.

These developments are intended to strengthen employee protections, but they also create practical challenges for HR teams that are already managing tight timeframes and competing demands.

Understanding how each change interacts with day-to-day people management is essential to reducing the risks associated with short service dismissals, managing performance fairly, and making confident decisions as the new rules take effect.

The new qualifying period of employment for unfair dismissal

The qualifying period to bring an unfair dismissal will reduce from two years to six months from 1 January 2027, with the original day‑one proposal having been dropped by the government following Lords’ opposition.

This change will ensure that employees with at least six months of service at that date will be protected from unfair dismissal.

Additionally, the power to vary the qualifying period by regulations will be removed, meaning any future changes to the qualifying period will require primary legislation, making amendments more complex and time-consuming.

Removal of the compensatory award cap: what it means for employers

The cap on compensatory awards for unfair dismissal will be removed entirely, aligning unfair dismissal with discrimination and whistleblowing claims. This will also be effective from 1 January 2027.

Compensatory awards are currently capped at the lower of 52 weeks’ pay, or £118,223 (reviewed annually). This has the potential of increasing the risk of financial exposure, particularly involving employee disputes with senior and high-earning employees, and those earning above the current statutory cap threshold.

Extended tribunal time limits from October 2026

From October 2026, the time limit for bringing a claim to the employment tribunal will be extended from three months to six months.

 Practical steps to reduce employer risk

1. Strengthen recruitment and onboarding processes

The qualifying period reducing to six months from 1 January 2027 emphasises the importance of employers getting recruitment decisions right. This means implementing robust selection criteria and interview processes, conducting thorough reference checks and background screening, and ensuring role requirements and expectations are clearly defined before hiring.

2. Implement rigorous probation management

Employers should set clear probation goals and review points, with continuous performance monitoring to ensure employees meet the standards required to pass their probationary periods. This includes:

• establishing written probation objectives within the first week
• scheduling regular review meetings (e.g. at one, three, and five months)
• documenting all feedback, concerns, and progress
• addressing performance or conduct issues immediately rather than waiting until the end of probation.

3. Ensure procedurally fair dismissals in all cases

Regardless of service length, all dismissals must follow fair procedures, including conducting reasonable investigations, providing opportunities to respond, holding fair hearings with the right to be accompanied and offering appeals.

Failure to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures may result in compensation uplifts of up to 25%. This is particularly critical given that the cap on compensatory awards will be removed entirely from 1 January 2027.

5. Prepare for more claims

Employers should expect higher volumes of early conciliation notifications from ACAS and tribunal claims, as more employees will be eligible to bring unfair dismissal claims.

This requires allocating additional HR and legal resources, training managers on proper dismissal procedures, and establishing clear escalation protocols for dismissal decisions.

6. Extend document retention policies

With the time limit for bringing claims extending from three months to six months from 1 October 2026, employers should retain all dismissal-related records following termination.

Taking into account the ACAS early conciliation process of 12 weeks (which can stop the clock on the time limit for bringing an unfair dismissal claim), employees could have up to nine months to bring a claim.

Therefore, it is important that employers retain all relevant documentation, including investigation notes and evidence, meeting records and correspondence, performance reviews and warnings, an decision-making rationale.

7. Review and update dismissal procedures

Employers should review current dismissal policies and procedures, ensure compliance with ACAS code requirements, train all managers involved in dismissal decisions, and consider legal advice before proceeding with dismissals during probation.

8. Anticipate delays in the employment tribunal system

With more employees eligible to bring unfair dismissal claims, employers should anticipate increased pressure on the employment tribunal system. This may result in longer waiting times for hearings and extended periods of uncertainty.

Employers should factor potential delays into their planning, consider alternative dispute resolution methods or settlement agreements where appropriate, and ensure that witnesses and documentation remain available for extended periods.

HR teams may wish to review their dismissal procedures and seek early advice to prepare for the 2026 and 2027 changes.

Important information

This article provides general guidance only and should not be treated as legal advice.

Key Dates for the Employment Rights Act 2025 and How Employers Can Prepare