If you employ people, the upcoming unfair dismissal changes in January 2027 are something you can’t afford to ignore.
We previously wrote about how the wider 2025/2027 employment law changes could affect your business, but as we edge closer to the new regulations coming into force, we’re now focusing specifically on what the new unfair dismissal rights could mean for employers day to day.
Helpful blog highlights:
|
With the unfair dismissal changes on the horizon, we’ve outlined what you need to know and how to prepare before hiring new employees. Our HR consultants stay updated on the latest employment laws to make sure you have the information and guidance you need for any upcoming changes.
Need experienced HR advice? Contact Ascott Blake today.
Changes to Employment Rights under the Employment Rights Bill
The Employment Rights Act 2025 is one of the biggest shake-ups to UK employment law in a long time. The phased reforms include measures already in play, such as a day-one right to sick pay and family leave, a ban on zero-hours contracts, increased flexible working arrangements, better protection for harassment and equality disputes, as well as the upcoming reduction in the unfair dismissal qualifying period.
Currently, employees generally need two years of continuous service before they can claim unfair dismissal. Under the proposed changes linked to the Employment Rights Act 2025, unfair dismissal protection is expected to apply much earlier in employment.
| Know where you stand with the new unfair dismissal regulations | |
|---|---|
Employees will be able to:
| Employers should:
|
The rules have shifted to give workers more protection from the beginning of employment. But at the same time, it means increased risk for the people running businesses.
How will unfair dismissal protection work under the new rights?
Significant changes to UK employment law are expected to come into force from 1 January 2027, creating major implications for employers across all sectors. The proposed reforms under the Employment Rights Act 2025 and wider Employment Rights Bill will strengthen employee protections and reduce the time before they can claim unfair dismissal.
What can I do to prepare as an employer?
As an employer, your focus should be on reviewing recruitment processes, probation periods, performance management procedures, and HR documentation well before January 2027.
Making early preparations will lead to lower legal risks for your business and help prevent complex employee relations challenges. If you’re hiring a new employee, here’s what you should focus on in the first 6 months to strengthen compliance and reduce unfair dismissal risk before an issue ever arises.
What do I do in the first 6 months?
The first six months of employment are expected to become increasingly important under the new rules.
Employers should focus on:
- Creating clear onboarding processes that take into account the new rules
- Outlining defined probation expectations
- Setting up regular formal reviews to monitor performance and keep everyone aligned
- Ensure written feedback and records are produced during any performance-related discussion
- Ensure early intervention where concerns arise
Many businesses currently treat probation periods informally. However, from January 2027, employers may need to demonstrate fair and reasonable decision-making far earlier in the employment relationship.
This isn’t about creating more paperwork or making managers afraid to manage people. It’s about making sure your business has fair, consistent processes in place from the beginning.
Good record-keeping and proactive HR support will become essential. So why not reach out to Ascott Blake and let our HR professionals guide you? You can also learn more on our blog, including our top tips for improving your HR processes.
How the Employment Rights Act 2025 could affect employer risk
Before, employees had a two-year qualifying period for unfair dismissal claims, which gave you significantly longer to work out whether someone was the “right fit” for the company and to let them go if they weren’t. But with the upcoming changes, employees have the right to claim unfair dismissal much sooner (potentially on their first day or within their six-month qualifying period).
This means your company can’t just fire someone because they “aren’t a good fit” anymore. Instead, you will need to follow a strict legal process to let someone go. If you don’t have a fair reason or you don’t carefully document the procedure, an employee could take it to a legal tribunal.
Compensation cap and compensatory award considerations
Before the Employment Rights Act 2025, there was a statutory cap on how much compensation a worker could receive if they were unfairly fired. The limit was usually capped at one year’s salary or £123,543 (whichever was lower).
The new changes happening in 2027 remove this limit entirely.
For employers, this could lead to significant financial risk. Disputes can become expensive very quickly if processes are not followed correctly. Even where a business believes it acted fairly, a lack of documentation or inconsistent handling can create unnecessary complications during a tribunal claim.
And it’s not just about the financial side. Employment tribunal claims can take up huge amounts of management time, affect team morale, and create reputational concerns for growing businesses.
Practical steps businesses should take before 1 January 2027
If there’s one thing we’ve learned from supporting businesses through employment law changes, it’s that the employers who prepare early are usually the ones who face fewer problems later on.
The upcoming unfair dismissal changes aren’t designed to catch businesses out. They’re intended to strengthen employee protections. However, they do mean you will need to be more proactive about how you recruit and manage people from day one.
Key actions include:
- Review employment contracts, notice periods, and probationary periods so they reflect your current employment practices and align with the new rules
- Improve probation processes to include structured performance reviews and document expectations and feedback throughout the process
- Diarise when probationary periods are due to expire
- Train managers on fair dismissal procedures, documentation requirements, conducting difficult conversations, and managing underperformance appropriately
- Strengthen HR policies so they remain fit for purpose, including performance management, capability procedures, disciplinary action, recruitment and onboarding
- And seek professional HR advice, whether you need specific guidance or just want to know you’re doing things right
It’s often far easier (and far less stressful) to prevent problems than it is to resolve them later.
Why HR and financial business planning go hand-in-hand
Employment law changes can affect your business’s finances and operations, not just HR. Every employee you hire is an investment of time, money, and resources. Costs for recruitment, onboarding, training, salaries, and management all add up. As unfair dismissal protection begins much earlier in employment, your business may need to work on getting those hiring decisions right from the start.
For example, if a new employee isn’t meeting expectations, it’s important to have clear processes and proper documentation to handle the situation fairly. This may require more time from management, help from HR, extra training, or performance reviews. While these actions help lower the risk of unfair dismissal, they also come with costs that need to be included in your wider business planning.
That’s why HR and financial planning go together. When your business is more prepared from an HR perspective, it becomes much easier to budget and avoid unexpected expenses further down the line.
Looking for specialist HR support for your business? Get in touch with Ascott Blake
Managing people is rarely simple, but you don’t have to wade through these new changes alone.
At Ascott Blake, we work closely with recruitment agencies, construction firms, tradespeople, beauty businesses, property companies, and other sectors to provide practical HR support that helps employers feel more confident in their processes. Whether you need help reviewing contracts, updating procedures, training management teams, or working on your HR policies, we’ll support you ahead of the changes.
Call our friendly HR team on 01279 797 222 or contact us online to discuss how we can support your business ahead of January 2027.
Frequently asked questions about the January 2027 unfair dismissal rights
What is the Employment Rights Act 2025?
The Employment Rights Act 2025 is a UK-wide update to employment rules.
It involves 28 employment law reforms aimed at strengthening workers’ rights and protections, helping people feel more stable from the start of new employment. Changes are taking effect throughout 2026 and 2027.
Does a probation period override an employee’s right to claim unfair dismissal?
No. While probationary periods offer both employees and employers flexibility while new hires settle into their role, they do not remove an employee’s legal employment rights.
And because, from January 2027, employees are expected to gain unfair dismissal protection after six months’ continuous service rather than the current two years, employers should consider capping probation periods before the 6-month mark to allow enough time to assess performance and employee fit early on.
Employers can’t simply extend probationary periods to delay statutory rights.
