Perhaps the most spoken about (and for some, the most controversial) change coming in as a result of the Employment Rights Act 2025 (ERA 2025) is the reform to unfair dismissal law. While this has been covered extensively in the employment space already, a brief headline explainer is that the qualifying period to bring a claim for unfair dismissal is being reduced from two years to six months. This effectively gives employees substantially more protection at a much earlier point in their career.
For employers, expect more PIPs, expect more investigations, expect more legal challenges from employees, expect more time spent managing exits, and expect more contact from your HR and legal team. Regardless of your perspective on the merits of this reform, it is near impossible to deny that these changes will generate more in the way of procedural and administrative effort for employers. Another related change concerns the removal of the statutory cap for unfair dismissal compensation (but we will leave that story for another day).
One of the consequences of this is that it will make little sense to operate a six-month probationary period for obvious reasons. The employee’s period of service spent on their probationary period still counts towards their continuous service. In other words, the label of this time being “probationary” does not stop the unfair dismissal clock from ticking. Therefore, a six-month probationary period is not going to be the best approach in the near future, considering that after six months, the employee will now have unfair dismissal protection.
It is also important to remember that the statutory minimum notice by law is at least one week once an employee has been continuously employed for one month or more (rising with the length of service). Consequently, employers need to be careful when dismissing employees close to the end of a six-month probationary period.
The reform to unfair dismissal begs the question though: what else can employers do now to prepare for these changes (which, as a reminder, kick in for unfair dismissal purposes on 1st January 2027)?
- Build a buffer: since the effective date of termination is not always the day the employer intends, decisions to dismiss employees during probation should be actioned with a healthy margin. Aim to conclude the process at least 2-4 weeks before the end of the six-month period (rather than on the final day). Or indeed, make use of a shorter probationary period instead. With this, ensure line managers are firm on this distinction between the dismissal decision date and the effective date of termination.
- Ensure your employment contracts have a contractual right to make a payment in lieu of notice (PILON) so that employment can be brought to an end quickly. Making sure a robust and clear PILON clause is included makes things simpler and easier.
- Consider a notice period which automatically extends after the probationary period has expired. There is nothing to prevent a shorter one week notice period during the probationary period which then automatically increases to, say, one month (or higher, provided this meets legal requirements) on completion of probation.
- Closely monitor commencement dates and understand the implications. For example, HR professionals and in-house lawyers should be clear that an employee with a start date on or before 1 July 2026 will acquire unfair dismissal protection on 1 January 2027.
How these changes intersect with an already stretched employment tribunal (ET) system is yet to be seen. We are now regularly seeing cases listed with hearings taking place in 2029 and 2030. There will certainly be an increase in unfair dismissal claims being brought which, without other steps being taken will only further grow the backlog and push cases even more distantly into the future.
This reality may make settlement a more attractive option for employees, rather than waiting potentially years for a hearing (whilst remaining subject to a duty to mitigate their losses and seek new employment). Equally, for those employees who simply will not budge or engage in settlement discussions, they may find themselves waiting a very long time to get their day in court.
If you require a review of your employment contracts to make sure they align with the incoming changes or there are other employment law matters you would like support with, then please do not hesitate to reach out to a member of our team: employment@wslaw.co.uk.