Unfair Dismissal Changes Are Coming – Is Your Business Ready?

Unfair Dismissal Changes Are Coming – Is Your Business Ready?  The upcoming changes are set to be one of the most significant employment law developments in recent years and many employers may be underestimating the impact.

From January 2027, employees will be able to bring an unfair dismissal claim after just six months' service, compared to the current two-year qualifying period. This means employers will have far less time to assess performance, address concerns and make decisions about whether a new hire is the right fit.  Importantly all new employees from 1 July 2026 will benefit from this protection.

What makes the change particularly important are its practical impacts. Whilst unfair dismissal rights will only arise after six months' service, Employment Tribunals are expected to examine the entire employment relationship when assessing the fairness of a dismissal. This means that actions taken during an employee's first few weeks and months, such as onboarding, training, probation reviews, objective setting and performance discussions, could become critical evidence in any future claim.

What Will This Mean for Businesses?

The most obvious impact is an increase in legal risk. More employees will qualify to bring unfair dismissal claims much earlier in their employment, potentially resulting in increased legal costs, management time and disruption to business operations.

However, the impact goes much further than tribunal claims.

Businesses may find that:

• Poor hiring decisions become more costly, as there is less time to identify and address concerns before unfair dismissal rights arise.

• Managers will need to act more quickly, with less opportunity to delay difficult conversations around performance, conduct or capability.

• Documentation will become increasingly important, as employers will need clear evidence to support decisions made during the first six months of employment.

• Employee relations issues may become more complex, particularly where concerns have not been raised promptly or expectations have not been clearly communicated.

• Operational productivity could suffer if underperformance is not identified and managed at an early stage.

• HR teams are likely to face increased workloads, particularly around probation reviews, performance management and manager support.

• Settlement discussions may become more common, leading to increased employment costs even where businesses believe they have acted reasonably.

• Leadership teams may become more risk-averse when hiring, potentially slowing recruitment decisions and increasing scrutiny during the recruitment process.

  
  

One date employers should be particularly aware of is 1 July 2026. Employees who start employment from or before this date will have accrued six months' service by the time the new legislation takes effect in January 2027 and will immediately benefit from the new unfair dismissal protections.  Businesses cannot wait until 2027 to start preparing and need to be ready for the change before the end of June 2026.

What Practical Steps Should Employers Take Now?

1.      Review Probation Periods

Many organisations currently operate six-month probation periods as standard. Under the new regime, there is a strong argument to reduce probation periods leaving sufficient time to manage those who are unsuccessful.

Our view is that employers should consider reducing probation periods to three months, with the option to extend for a further two months where additional assessment is agreed as being required on a case-by-case basis. This encourages earlier decision-making and provides greater flexibility where concerns arise.

2.      Introduce Structured Review Points

Managers should not wait until the end of probation to assess performance.

Implementing formal reviews at 30, 60 and 90 days helps identify issues early and creates a clear record of feedback and support provided.

3.      Train Managers

The success of any performance management process depends heavily on line managers. Training should focus on:

• Setting clear expectations.

• Conducting effective probation reviews.

• Holding difficult conversations.

• Addressing underperformance promptly.

• Maintaining accurate records.

4.      Strengthen Recruitment Processes

The best way to manage employment risk is to try to increase the probability that you have hired the right candidate in the first place.

Employers should review recruitment practices, interview processes, assessments and onboarding programmes to ensure candidates are being properly evaluated before appointment.

5.      Strengthen Systems and Improve Documentation

If concerns arise, employers will need to have captured and be able to provide clear evidence in paper or electronic format.

Businesses should ensure records are maintained for:

• Induction and training.

• Performance objectives.

• Review meetings.

• Feedback discussions.

• Support provided.

• Improvement plans and outcomes.

6.      Review Contracts and Policies

Employment contracts, probation clauses, capability procedures and performance management policies should all be reviewed to ensure they remain effective under the new legal framework.

7.      Use HR Data More Effectively

Employers should consider monitoring probation outcomes, turnover rates during the first six months, and common reasons for failed probation periods. This data can help identify trends and improve hiring decisions.

8.      Plan Workforce Changes Earlier

Where restructures, performance concerns or organisational changes are anticipated, employers should be thinking further ahead. Delaying decisions could significantly increase legal exposure once employees acquire unfair dismissal protection.

The Bottom Line

The reduction in the unfair dismissal qualifying period is more than just another employment law update, it represents a fundamental shift in employment risk.

Businesses that continue to rely on informal probation processes, inconsistent management practices, poor systems and documentation may find themselves increasingly exposed to claims and disputes.

Those that act now by strengthening recruitment, improving manager capability, tightening probation processes and embedding a culture of early intervention will be far better positioned to manage risk and protect their business.

The key message is simple: the first six months of employment are one of the most important stages of the employment lifecycle.  Employers who prepare now will be in the strongest position to hire the right candidates and manage them through early employment and a successful probation period.

If you are concerned about implementing these changes please contact me at annette@hbhrs.co.uk or phone 07748 713936 for further advice or support.