Many employers will be aware that, in most cases, employees currently need two years’ continuous service before they can bring a claim for ordinary unfair dismissal (although certain claims, such as discrimination, are exempt from this requirement). However, from 1 January 2027, this is set to change. Under Section 25 of the Employment Rights Act, the qualifying period for unfair dismissal claims will reduce from two years to just six months.
This change will significantly increase the importance of effective recruitment, selection and probationary processes. Businesses will need to ensure they are making informed hiring decisions, setting clear expectations from the outset and actively managing performance during probationary periods.
In addition, the current cap on compensatory awards for unfair dismissal (currently the lower of £123,543 or 52 weeks’ gross pay) is due to be removed, potentially increasing the financial risks associated with dismissal decisions. Further changes in relation to spent convictions and employees’ rights to receive written reasons for dismissal will be implemented.
With these reforms likely to have a significant impact on employers, now is a good time to review your recruitment, probation and dismissal processes. If you would like to discuss how these changes may affect your business, please get in touch.