Unfair Dismissal Reform: Why Employers Need To Act Before January 2027

The Employment Rights Act (ERA) 2025 will bring significant changes for employers from 1 January 2027, particularly when it comes to managing newer employees.

Changes to unfair dismissal rights mean businesses should be reviewing their probation, performance management and dismissal processes sooner rather than later.

Employment Law Associate Solicitor Lauren Kilbride explains what employers need to know and what practical steps can be taken to reduce risk.

A significant change for employers

Currently, an employee will usually need two years’ continuous service before they can bring an ordinary unfair dismissal claim.

From 1 January 2027, that qualifying period will reduce to six months.

Importantly, the change will not apply only to employees recruited after 1 January 2027. It will also affect existing employees who have already reached six months’ continuous service by that date.

An important date for employers

Consider an employee who started work on 1 July 2026.

Under the current law, that employee wouldn’t have enough service to bring an unfair dismissal claim during 2026. However, by 1 January 2027, they will have completed six months’ continuous service and will be able to bring an unfair dismissal claim.

Similarly, employees who have less than six months’ service on 1 January 2027 will generally become protected and have the right to bring an ordinary unfair dismissal claim once they reach six months’ continuous service.

This is important because employers cannot look at when the employee started and assume that the old two-year qualifying period will continue to apply to them because they came into employment before the 1 January 2027.

What does this mean in practice?

The change doesn’t, of course, mean employers will be unable to dismiss employees fairly once they reach six months’ service.

Employers will still be able to dismiss employees where there is a fair reason for dismissal and a fair process has been followed.

The five potentially fair reasons for dismissal remain:

• Capability
• Conduct
• Redundancy
• Illegality
• Some Other Substantial Reason (SOSR)

The change simply means that employers may need to justify dismissal decisions much earlier in the employment relationship than they do currently.

Will employers need to follow lengthy procedures prior to dismissal?

The new rules under the ERA 2025 do not mean every dismissal of an employee with six months’ service must involve months of warnings, meetings and formal procedures. The process should be appropriate and proportionate to the circumstances.

Employers should be able to demonstrate that they:

1. Identified the reason for the proposed dismissal
2. Raised their concerns with the employee
3. Gave the employee the opportunity to respond
4. Considered the employee’s explanation
5. Reached a reasonable decision based on the available information
6. Communicated the decision clearly.

Employers should avoid reaching a decision first, then attempting to justify it afterwards.

A practical example

Imagine an employee joined a business on 1 July 2026 and is placed on a 12-month probation period.

Concerns arise regarding their performance, but those concerns are never formally discussed or documented. The employee is then dismissed shortly after 1 January 2027 because management believes they are “not the right fit”.

By that point, the employee may have unfair dismissal protection. Without evidence showing the concerns were raised, considered and addressed during employment, the employer could face greater difficulties defending a claim.

What about probation periods?

Many employers use probation periods to assess whether a new employee is suitable for a role.

However, having a probation period will not, by itself, prevent an employee from getting unfair dismissal protection once they have reached six months’ service.

This makes effective probation management more important than ever.

If concerns arise regarding performance, conduct or suitability, they should be addressed as early as possible rather than being left until the end of the probation period.

Employers should also remember that other employment rights can apply from the beginning of employment, regardless of length of service, including protection from discrimination.

To defend an unfair dismissal claim, employers will need to show both that there was a fair reason for dismissal and that it was reasonable to dismiss in the circumstances.

For example, where an employee is struggling to perform their role, the employer should be able to show:

• What the concerns were
• How those concerns were communicated
• What opportunity the employee had to respond or improve
• What information was considered before the decision to dismiss was made

It won’t necessarily be enough simply to say that the employee was still in their probationary period or that they were not the right person for the job.

Good records will become increasingly important

One of the most effective ways employers can protect themselves is by keeping clear contemporaneous records.

If a dismissal is later challenged, employers may need to explain events that took place several months earlier, including:

• When concerns first arose
• What discussions took place
• Whether support or training was offered
• What opportunities were given to improve
• Why dismissal was ultimately considered appropriate

Records do not need to be lengthy or complicated.

In many cases, a concise but accurate note of a performance or probation review meeting may prove far more valuable than trying to recall a conversation months later.

What should employers do now?

Employers don’t need to wait until January 2027 to prepare for the changes.

Practical steps include:

1. Review your probation process
2. Address problems with employees early on
3. Train managers
4. Review policies and contracts
5. Take advice before dismissing

The safest approach for employers would be to set clear expectations, address concerns early, give the employee a chance to respond, keep a record and make sure there is a sound reason and evidence for the decision.

The reduction in the unfair dismissal qualifying period from two years to six months represents one of the most significant changes introduced by the ERA 2025.

Employers that begin preparing now will be in a much stronger position to manage the changes effectively.