6 month unfair dismissal rights: What employers need to know

Under the new Employment Rights Act 2025 the minimum period of service required to qualify to bring a statutory claim for unfair dismissal has been reduced from 2 full years to 6 months from 1 January 2027 onwards.

Where an employer opts to make a payment in lieu of notice, rather than the employee serving any period of notice, this 6 month period is inclusive of a 1 week extension of the deemed qualifying service period to reflect the applicable statutory notice period.

These new rights to bring a claim for unfair dismissal will apply to employees on permanent contracts or fixed term contracts where the actual length of service is more than 5 months and 3 weeks (where no notice is served), or 6 months (where at least 1 weeks’ notice has been served), as at 1 January 2027.

Therefore employers should be mindful that employees who have recently started working, even if they remain on their probationary period, could be protected against unfair dismissal by the start of 2027, with everyone starting on or before 1 July 2026 being captured.

In addition, the new rules see the removal of the cap on compensation which currently applies in cases of unfair dismissal, meaning that these new employees could be much more expensive and difficult to terminate – unless the same or a greater level of documented formal and fair performance assessment process is used to manage their probationary period on a monthly basis in the lead up to the six months anniversary of their start date, if there are performance concerns.

Employers should ideally be reviewing their employment contracts and probation policies, procedures and templates now to provide clear monthly performance targets and properly documented assessment of whether those targets were achieved. In addition, a review of the length of the probationary period is sensible, if this has traditionally been 6 months, with a move to an initial formal probationary review at 3 or 4 months, with scope to extend probation to no more than 5 months in total if the employee is borderline in terms of satisfactory performance. This should ensure businesses have time to take a final assessment on suitability at the end of any extended period before an employee obtains unfair dismissal rights.

If an employee fails their initial probationary review, the company should ensure it is more proactively managing performance concerns identified, aiming to set SMART objectives over the next 4 – 6 weeks, to ensure the employee is given a reasonable opportunity to improve their performance, before a final probation decision is made at the 4 or 5 month point. This process should align with existing capability policies as far as possible apart from the necessarily swift time period of any probationary performance process.  During this period, there should be regular reviews so the employee is clear on what is expected of them and arranging a final review at the 4 or 5 month mark ensures that any dismissal meeting on performance grounds takes place in a timely manner.

Where a current employee is not due to have a formal probationary review until after 1 January, and where they would accrue the requisite service to pursue an unfair dismissal claim before this point, an employer could consider sending out a variation of terms letter setting out a proposed alteration to the probationary period, and, subject to the employee contesting these changes, this would potentially enable the employer to bring forward any final probation review meeting if there were significant conduct or performance issues notified to the employer within the critical first six months period. The variation letter should ideally be sent out to the employee as soon as possible.

Alternatively, as most probation clauses make clear that performance and suitability for the role will be assessed on an ongoing basis during probation, employers may not need any formal variation to this in order to conduct a probation review meeting earlier than the stated end of the probationary period, with the ability to terminate employment early where concerns exist, before they accrue the required service to bring an unfair dismissal claim, on or after 1 January.

Managing sickness absence and capability dismissals during the probationary period

If an employee is absent for work for a significant amount of time during their probation period, it is important for the employer to make every effort to get the performance assessment process back on track with a monthly documented performance review and an earlier formal probationary review if needed, provided the employment contract allows for this.

This could involve scheduling a return to work meeting including explaining any identified performance issues, expectations and targets, together with a timescale for review, with appropriate planning to ensure there was minimal delay in implementation.

If the employee is on a tapered return to work, the process will need to be adjusted or deferred to take this into account.

That said, if there are material concerns around performance and little appetite to manage this through a more protracted and formalised capability process if the employee did accrue the requisite service to pursue an unfair dismissal claim, because of high levels of absence, an employer could look to make a decision regarding ongoing employment before this point to minimise the risk, In extreme cases, this could mean taking the difficult decision to confirm a decision to dismiss for a failed probation in writing. This should always be managed with caution, especially given the potential risk of a disability related claim depending on the reasons for the absence, and should be a last resort.

Decisions on extending fixed term contracts or making permanent contracts conditional on a satisfactory period of fixed term work

Employers need to be making decisions on whether to extend fixed term contracts at the 3 or 4 month mark to ensure that decisions are made well in advance of statutory unfair dismissal rights being acquired and to ensure that a proper meeting with the employee is arranged and that the reasons for non-renewal are made clear to the employee verbally and in writing with an opportunity for consultation about potential redeployment.

Employers might wish to consider hiring employees on an extendable fixed term contract of 3 or 4 months with a permanent contract only on offer if performance, attendance and conduct has been satisfactory during the initial period.

Where fixed term contracts are longer than 6 months, employers must remember that the end of a fixed term contract is deemed a dismissal in law, so the normal rules apply. Employers are therefore still required to identify a potentially fair reason for the dismissal and ensure this is communicated to the employee, with any required process being followed in the usual way. In practice, it will usually be a ‘some other substantial reason’ (for example, where they are employed to support with a specific project, or a maternity cover, and that project or cover has come to its expected end) or redundancy dismissal.

Removal of the cap on compensation

More consideration will need to be given to exits for senior employees and high earners, especially where their remuneration is mixed, being made up of a base salary and other incentives, such as share options.

Currently, exits like this will often be managed through a negotiation, with a package being offered near or at the unfair dismissal cap, with employers relatively safe in the knowledge that the advice given to the employee will be that they cannot reasonably demand a higher amount, even if it is unlikely to account for their likely losses.

This will shift significantly from January 2027, with expectations for employees like this likely to be significantly higher and with businesses therefore needing to start considering how it would manage these scenarios moving forwards. Organisations may need to move to a position where they are implementing normal processes in relation to these individuals, to help strengthen its position, in the same way as they would for other employees whereas historically, there has been a reluctance to put a very senior employee through a formal performance process.

If you have questions about how these changes may affect your organisation or need assistance updating your employment contracts and policies, please contact our employment team for expert advice and support.