What is changing
The Employment Rights Act 2025 is being implemented in phases. Day-one paternity and unpaid parental leave and the statutory sick pay changes took effect on 6 April 2026. Employment tribunal time limits increase from 3 months to 6 months on 1 October 2026, and the government plans to bring in the harassment measures, including the obligation not to permit third-party harassment, on 30 October 2026. The zero-hours contract reforms are not yet in force: the government has said their timings will be updated after consultation.
The unfair dismissal changes take effect on 1 January 2027, under the Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026 (SI 2026/559). They apply where the effective date of termination is on or after 1 January 2027, even if notice of dismissal was given before that date. The government's planned date for the fire and rehire protections is also January 2027, subject to parliamentary processes. These changes affect every employer in England, Scotland, and Wales who employs staff, regardless of sector or size.
- Effective date
- 1 January 2027 — for dismissals with an effective date of termination on or after this date
- Qualifying period
- Reduced from 2 years to 6 months of continuous employment
- Compensatory award cap
- Removed entirely — tribunals can award uncapped compensation
- Day-one protections
- No qualifying period for automatically unfair dismissals (pregnancy, whistleblowing, trade union membership)
- Fire and rehire
- Planned for January 2027 — dismissal for refusing a restricted contract variation becomes automatically unfair
Qualifying period drops to six months
Where the effective date of termination is on or after 1 January 2027, employees can claim ordinary unfair dismissal after six months of continuous employment, down from the current two years.
In practice, this means:
- An employee dismissed after six months and one day can bring a tribunal claim if dismissal was for an unfair reason or followed an unfair procedure
- Employers can no longer rely on the two-year qualifying period as a buffer against claims from newer employees
- Fair procedures must be followed from much earlier in the employment relationship
- Performance management, capability assessments, and conduct procedures should begin well within the first six months
Probation and the first six months
The Employment Rights Act 2025 does not create a separate lighter-touch dismissal process for the first six months. It changes the qualifying period from two years to six months, so once an employee has six months' continuous employment the usual unfair dismissal rules apply in full.
- Consider aligning probation periods with the six-month qualifying period
- Front-load performance reviews and objective-setting during probation
Automatically unfair dismissals (pregnancy, whistleblowing, trade union membership) remain day-one rights with no qualifying period.
Compensatory award cap removed
For dismissals with an effective date of termination on or after 1 January 2027, the statutory cap on the compensatory award for unfair dismissal is removed. Currently capped at the lower of 52 weeks' pay or a statutory maximum, the compensatory award will instead be based entirely on the employee's actual financial losses.
This significantly increases the financial risk of unfair dismissal, particularly for:
- High earners — losses could run to hundreds of thousands of pounds for senior employees who struggle to find equivalent roles
- Long-serving employees — future loss of earnings can be substantial where the employee had long tenure and limited alternative employment prospects
- Older employees — tribunals may award loss of earnings up to retirement age in some cases
The basic award continues to be calculated using the statutory week's pay cap and the existing formula based on age and length of service.
Extended tribunal time limits
The six-month time limit for bringing employment tribunal claims applies from 1 October 2026, where the matter complained of happens on or after that date. Combined with the shorter qualifying period and uncapped compensation, this creates a longer window of exposure for employers after any dismissal.
Employers should retain dismissal records, performance management documentation, and correspondence for at least 12 months after an employee's departure.
What you need to do before 1 January 2027
- Review probation policies — consider aligning probation periods with the six-month qualifying period. Set clear objectives, regular check-ins, and documented performance reviews from day one.
- Update dismissal procedures — ensure all dismissals, including during probation, follow a fair process with a clear reason, an opportunity for the employee to respond, and a right of appeal.
- Train managers — line managers must understand that unfair dismissal protection applies from six months, not two years. Invest in training on fair performance management, capability procedures, and the new qualifying period.
- Review employment contracts — update contracts and handbooks to reflect the new qualifying period. Remove any references to a two-year qualifying period.
- Assess financial risk — with uncapped compensation, consider whether your employer's liability insurance covers employment tribunal awards. Review settlement strategy for potential claims.
- Strengthen record-keeping — document all performance management, disciplinary proceedings, and dismissal decisions thoroughly. Retain records for at least 12 months after departure.
- Review hiring processes — with protection from six months, the cost of a poor hire increases. Invest in robust recruitment, induction, and early performance assessment.
Northern Ireland
Employment law is devolved in Northern Ireland. Most of the Employment Rights Act 2025 does not apply in Northern Ireland. These unfair dismissal changes apply in England, Scotland, and Wales only. Check with the Labour Relations Agency for equivalent Northern Ireland provisions.