Unfair dismissal changes 2027: prepare now, not January
Big changes to employee rights are on the way, and the window for your actions now to count is already open. From 1 January 2027, under the Employment Rights Act 2025 (the legislation most people still know by its earlier name, the Employment Rights Bill), the qualifying period for unfair dismissal claims drops from two years to six months, and the cap on compensation goes with it. Together, these two changes put far more pressure on how you recruit, onboard and manage people, right from their first week.
Quick summary: from 1 January 2027, UK employees need six months’ service (not two years) to bring a standard unfair dismissal claim, and there is no upper limit on the compensation a tribunal can award. Anyone already past six months’ service on that date is covered immediately.
If your business isn’t already looking at management training to prepare, now is the time to give it some thought. Most managers are not yet fully aware of what these changes mean in practice, and they are the people who will be most exposed when the new rules land.
What’s actually changing
Two separate reforms take effect on the same date, and it’s worth being clear on both.
The qualifying period for unfair dismissal drops to six months. Right now, an employee generally needs two years’ continuous service before they can bring a standard unfair dismissal claim. From 1 January 2027, that drops to six months. Anyone who already has six months’ service on that date gets protection immediately. Everyone else gets protection as soon as they cross the six-month mark, so the effect builds gradually rather than hitting all at once, but it hits every business with staff on shorter tenures.
The compensation cap is removed. Unfair dismissal compensation currently has two parts: a basic award and a compensatory award. The compensatory award is capped at the lower of a year’s gross pay or a statutory maximum, which was uprated to £123,543 from 6 April 2026. From January 2027, that ceiling on the compensatory award disappears. Tribunals will base the award on the employee’s actual financial loss, with no upper limit. The basic award keeps its own separate statutory cap and is not affected. For a dismissal involving a senior employee, or someone who stays out of work for a long time afterwards, removing the compensatory award cap changes the financial exposure considerably.
The government has confirmed both changes will go ahead without further consultation, so this isn’t a proposal still open to change. It’s a fixed date to plan around.
It’s also worth clearing up a common mix-up: earlier versions of the Employment Rights Bill floated a “day one” unfair dismissal right paired with a nine-month statutory probation period and a lighter-touch dismissal process. That version didn’t make it into the final law. What actually takes effect on 1 January 2027 is the six-month qualifying period described above, with no separate statutory probation period. If you’ve seen “day one rights” mentioned elsewhere, it’s worth checking the date of that source, since the policy moved on from there.
Why recruitment, onboarding and management all feel the pressure
Put the two changes together and the practical effect is that decisions made in someone’s first few months now carry the same legal weight as decisions made about a two-year employee, but with a bigger price tag attached if they go wrong.
That reshapes several things at once. Probation periods that run longer than six months will need a rethink, because a decision to end someone’s employment after the six-month mark now falls squarely within unfair dismissal territory. Onboarding needs to move faster and more consistently, so that genuine issues with fit or performance surface, and are documented, well before that threshold. Recruitment has to work harder to reduce early mismatches in the first place, since there’s less time to correct a poor hire informally before a dismissal decision carries real risk.
None of this is about making it harder to manage people fairly. It’s about making sure that when a decision does need to be made in someone’s early months, there’s a fair, well documented process behind it, in line with the Acas Code of Practice (the official guidance tribunals use to judge whether a dismissal process was reasonable), rather than an informal chat and a decision made on the spot.
Managers are the ones who will feel this first
The people in your business most likely to need support and guidance through this are your managers. They’re the ones running probation reviews, giving feedback, and making the day-to-day calls on whether a new starter is working out. Under the current rules, a shaky process in someone’s first year rarely ends up in front of a tribunal. Under the new rules, it can.
That’s a significant shift in what “good management” needs to look like in practice, and it’s not one many managers have been trained for. Structured probation reviews, clear written feedback, consistent record-keeping, and knowing how to run a fair capability or disciplinary conversation are all things that matter far more once the qualifying period drops to six months. If your managers haven’t had formal training on any of this, or haven’t looked at it in a while, this is worth addressing well before January.
What to look at now
A few areas are worth working through before the new rules take effect:
- Review probation lengths and make sure your process gives managers a genuine decision point comfortably inside the six-month window, not right up against it.
- Check that performance reviews and check-ins during probation are actually happening, not just scheduled, and that outcomes are recorded somewhere retrievable.
- Look at how consistently your employee records capture feedback, warnings and support given during someone’s early months, since this is exactly the evidence a tribunal would want to see.
- Identify which managers haven’t had training on fair dismissal process, probation management or the Acas Code, and start closing that gap.
- Revisit your recruitment process for any roles with high early turnover, since reducing poor-fit hires at the source matters more once the safety net of a long qualifying period is gone.
Frequently asked questions
When does the unfair dismissal qualifying period change in the UK? From 1 January 2027, the qualifying period for standard unfair dismissal claims drops from two years to six months of continuous service.
What happens to employees who already have some service on 1 January 2027? Anyone with six months’ service or more on that date gains unfair dismissal protection immediately. Employees with less service gain protection as soon as they reach six months.
Is the unfair dismissal compensation cap being removed? Yes, but only the compensatory award element. The current cap, the lower of one year’s gross pay or the statutory maximum of £123,543, is removed from January 2027, and compensation will instead be based on the employee’s actual financial loss with no upper limit. The separate basic award keeps its own statutory cap and is unaffected.
Is unfair dismissal becoming a “day one” right in the UK? No. Earlier drafts of the Employment Rights Bill proposed a day-one right paired with a nine-month statutory probation period and a lighter dismissal process. That version was dropped. The law that takes effect on 1 January 2027 is a six-month qualifying period, with no separate statutory probationary period.
Do probation periods need to change before 2027? Not by law, but many businesses will want to shorten probation periods, or make sure review points fall well before the six-month mark, so managers have time to make and document a fair decision within that window.
What should managers do differently once the qualifying period drops? Managers will need to run more structured probation reviews, give and record clear feedback, and follow a fair process for any capability or disciplinary decision, in line with the Acas Code of Practice, even for employees who have only been with the business a short time.
What is the Acas Code of Practice? It’s the official guidance that employment tribunals use to judge whether a disciplinary or dismissal process was fair. Following it matters more once far more dismissals fall within reach of an unfair dismissal claim.
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