Changes to Unfair Dismissal laws…

By Annabel Priest

Changes to Unfair Dismissal Law

On 1 January 2027, the qualifying period for making claims of unfair dismissal will change from two years to six months.

The aim of the new law is to strengthen employment rights and increase job security for employees earlier in their employment, whilst also providing a 6-month threshold to ensure employers still have time to address performance issues before full protection kicks in.

Whilst employers may be tempted to think that this sounds like a distant change, it is vital that businesses begin preparing now, especially because the new legislation has a retroactive effect. This means that anyone employed before 1 July 2026, will gain unfair dismissal protection overnight on 1 January, even if their employment started when the 2 year qualifying period was in force.

To note, anyone employed between 2 July 2026 and 31 December 2026 would not inherit this right until such time as they reach the 6 month anniversary of their start date.

It is fairly standard for new employees to be subject to a 6-month contractual probation period, which typically allows the employer-employee relationship to be tried and tested prior to moving forward with the commitment to permanent employment.

However, employers should now considering shortening their probation periods as a result of the risks involved with keeping employees on a 6 month probation.

Any delay in holding end of probation review meetings to consider passing, extending or terminating probationary periods could see the employee reach 6 months of qualifying service and automatically gaining unfair dismissal rights.

In addition to this, it is likely that the risk of constructive unfair dismissal claims will rise. Employers must be proactive in ensuring that workplace culture is reviewed, to prevent employees from simply trying their hand at a claim for constructive unfair dismissal where they felt the culture was poor.

Employers are urged to focus on training and induction to ensure that all employees are being set up for success in the business. It is important to have clear targets and performance measures for all employees, as well as regular, documented reviews throughout each probationary period.

As well as employment contract templates, now is a good time for disciplinary policies to be reviewed to ensure compliance with the new law, particularly if they contain short-service clauses. Training for managers on the new procedures will also reduce the risk of potential claims arising.

On a brighter note, there may be an unexpected benefit for employers.  Currently, employees with less than 2 years’ service often try and get around the fact that they are not eligible to bring an unfair dismissal claim by bringing whistleblowing or discrimination claims.  These claims are typically much more complicated and expensive to defend than ordinary unfair dismissal.

It is hoped that allowing employees with short service to bring unfair dismissal claims will reduce the number of these complex claims, reducing the burden on both employers and the Tribunal service.

Conclusion

This is a significant change for employment law, so it is crucial now more than ever to ensure that employment contracts, policies and procedures are reviewed to ensure all processes adhere to the new law. Any employer waiting until 1 January 2027 to make changes may find that it is too late, and replacing or removing employees with 6 months’ service will be risky, even where an employee is underperforming.

For a free no obligation discussion about the changes discussed in this article, or to discuss a review of existing contracts and policies, please contact Annabel Priest on 01604 609590 or annabel.priest@dfalaw.co.uk.