From January 2027, employers could face unfair dismissal claims after just six months of employment instead of two years; dramatically increasing legal and financial risk for businesses.
Automatic unfair dismissal
An automatic unfair dismissal claim can be brought regardless of an employee’s length of service. This position is not changing. However it is important for employers to understand that an employee may make an automatic unfair dismissal claim if they are dismissed for a reason that breaches their statutory employment rights, and the employer cannot legally justify the dismissal.
This includes dismissals that are discriminatory (for example related to disability, pregnancy, race or age) or dismissals connected to an employee asserting a statutory right such as raising a health and safety concern or acting as a trade union representative. There is no compensation cap a tribunal can award for automatic unfair dismissal.
What Employers Need to Know Now
‘Ordinary’ unfair dismissal
Currently an employee can only bring an ordinary unfair dismissal claim once they have at least 24 months’ of continuous service. As a result, an employee who may feel settled in their role after nearly two years can still be dismissed without any formal process, provided the reason for dismissal is not automatically unfair. This applies whether or not the employee has done anything wrong.
At present the maximum compensatory award for ‘ordinary’ unfair dismissal is the lower of £118,223 or 52 weeks gross pay.
What Changes in January 2027
From January 2027, employers will have only six months to assess an employee’s suitability, ability and performance in the role. During this period, an employee may be dismissed without the employer facing an ‘ordinary’ unfair dismissal claim.
Any dismissal after six months will therefore need to follow a fair and reasonable process in line with the ACAS Code of Practice. This will include issuing appropriate warnings relating to performance or conduct and allowing reasonable time and support for improvement before any decision to dismiss.
In addition, from 1 January 2027 the current statutory compensation cap is expected to be removed, allowing tribunals to award full loss of earnings. For higher earners in particular, this could significantly increase the financial risk for employers.
What does it mean and what are the implications for employers?
Employers will continue to face the risk of automatic unfair dismissal claims regardless of an employee’s length of service. This is where probation periods become critical. A meaningful, well-managed and well-documented probation or performance process will help employers defend such claims by demonstrating that a dismissal was genuinely based on performance or conduct, rather than a ‘protected’ reason.
What does a ‘good’ probationary process look like?
From the first day of employment, the probation period should be a structured and supportive phase, typically lasting around three months but extending up to five months where appropriate. Its purpose is to help a new employee integrate into the organisation and clearly understand what is expected of them.
Managing performance should begin from day 1 and should focus on continuous improvement and regular one to one meetings with their manager. It is important to have regular opportunities to discuss objectives, progress, support needs and feedback. These meetings should be properly documented using a well-designed probation review form.
By the end of the probationary period, there should be no doubt about whether the employee has the skills, knowledge and experience required for the role. If they are falling short of expectations, this should be clearly evidenced with documented examples, and the eventual outcome – whether dismissal or continuation of employment – should not come as a surprise to the employee.
If you’re reviewing your probation or performance processes in light of these changes, we can help ensure they are structured, compliant and effective. Please contact your account manager for more information or book a free 20 min call – Gravitate HR with no obligation.
