What is changing from January 2027?

Employers using fixed-term contracts should start preparing now for significant unfair dismissal law changes coming into force in January 2027. From January 2027, the qualifying period for dismissal reduces from two years to six months under changes from the Employment Rights Act 2025.

For employers who regularly use fixed term contracts (FTC) this may cause some concern.

Currently a one-year fixed term contract can end with little risk to an employer and without a formal process being followed (although legally this is still a dismissal, and good practice would be to follow an appropriate process). From January 2027, that position is likely to change.

When are fixed-term contracts used?

  • Covering periods where permanent staff are away for a set time, such as maternity leave or extended sickness absence
  • When the business needs skills for a defined piece of work e.g. project implementation, research or analysis
  • During peak holiday season
  • Where there is limited funding

The Importance of Using Fixed-Term Contracts Correctly

Fixed-term contracts should not be used for filling a permanent role. From January 2027, ending a fixed term contract (after 6 months) will be no different from dismissing a permanent employee and in the absence of any concerns about the employee’s performance or conduct, the only potentially fair reasons for dismissal would be either redundancy or some other substantial reason. Distinguishing between these reasons is important, as the applicable reason will determine the process the employer is required to follow.

What can employers do now to prepare for the change?

  • Review current FTC’s and consider whether they are fit for purpose i.e. are these used for any of the situations mentioned above and do they cover exact terms and conditions implied
  • Review when FTC’s are due to end and how you will justify a dismissal if the employee has qualifying service
  • Ensure your managers are aware that if any FTC is due to extend past 6 months after 1 January 2027, they will need a fair reason and must follow a fair process to dismiss
  • Employers may also wish to review their wider HR processes and ensure managers are supported with appropriate HR consultancy support

Make sure your processes are clear and understood where FTC’s are used. If you need advice or would like some more information, please contact your account manager or book a free 20 min call – Gravitate HR with no obligation.