Changes to unfair dismissal law

Due to come into effect in January 2027

The Employment Rights Act brings significant change to unfair dismissal law with effect from 1st January 2027.

These changes will place major operational and financial implications for employers, particularly in how probationary periods are managed.

The two main reforms that are due to take place from the 1st January 2027 are as follows:

• The current cap on unfair dismissal compensation (the lower of 52 weeks’ salary or a capped £118,223) will be removed, meaning that a statutory maximum will no longer limit compensatory awards.
• There will be a six-month qualifying period for ordinary unfair dismissal protection. This means that from 1st January 2027, employees with six months’ service will automatically gain unfair dismissal protection from that date, and those with less than six months’ service as of the 1st January 2027 will receive protection once they reach the six-month mark.

We recommend that, from the 1st July 2026, contracts and probation policies be amended to effect these changes, introducing a three-month probation period with the possibility of extending for up to three months.

Contracts, disciplinary, and capability procedures should also be reviewed to remove any limiting processes within the first twenty-four months.

Processes for onboarding and probationary reviews should be reviewed to ensure they can address any issues (performance or otherwise) that arise early on, and managers should receive training on the new rights and requirements to ensure probations, extensions, and potential terminations are managed robustly.

If you are reviewing how managers handle probation and early dismissal decisions ahead of the April 2026 changes, contact Solutions for HR for support with process updates and documentation.