KR HR & TRAINING NEWS ARTICLES

It’s been a busy time for UK employment law with the implementation of several key legal changes under the Employment Rights Act 2025. With further amendments expected, it is important to highlight a key change which brings significant risk for employers. 

From 1 January 2027, the qualifying period for unfair dismissal is expected to reduce from two years to six months. 

For employers, this change will impact not only how probation periods are managed, but also the way fixed-term contracts (FTCs) are used. 

What’s Changing? 

Employees will gain the right to claim ordinary unfair dismissal after six months’ service (this arises where an employer dismisses without a fair reason and/or without following a reasonable procedure). 

This represents a major shift away from the current position, where employers have greater flexibility during the first two years of employment. Importantly, this also introduces increased financial risk, with plans to remove the cap on unfair dismissal compensation. (Currently, the compensatory award is capped at the lower of 52 weeks’ gross pay or £123,543.) 

Impact on Probation Periods 

Most organisations use probation periods of three or six months to assess suitability. 

Under the new rules: 

• A six-month probation period will align with when unfair dismissal protection begins 
• Dismissal at or after probation may carry unfair dismissal risk 
• Employers will need to demonstrate both a fair reason and a fair process, even at this early stage 

What this means in practice 

Whilst not best practice, probation periods will no longer act as a “safe window” to exit employees without process. 

Employers should: 

• Review current probation periods and consider flexibility (e.g. 4 months + 2-month extension for improvement) 
• Set clear expectations and objectives from day one 
• Hold regular review meetings (e.g. week 1, 3, 6, 10) 
• Address concerns early, keeping clear written records 
• Provide support and a reasonable opportunity to improve 
• Avoid surprises by not leaving issues until the end 

The Importance of Getting Recruitment Right 

With unfair dismissal protection now applying much earlier, the quality of hiring decisions becomes even more critical. Investing more time and effort at the recruitment stage can prevent issues during probation. 

If employers have less flexibility to exit employees later, the focus must shift to getting the right person into the role from the outset. 

What this means in practice 

• Use more robust selection methods 

Interviews alone may not give a complete picture. Consider: 

• Role-specific tasks or work-based scenarios 
• Practical assessments aligned to the job 
• Case studies or problem-solving exercises 

These provide a clearer insight into how a candidate will perform in reality. 

• Introduce mini assessment centres 

For key roles, even a light-touch assessment approach can add value. This might include: 

• Practical exercises 
• Short team-based activities 
• Realistic job simulations 

Involving current team members can be particularly effective to assess team fit and working style, while providing more balanced and informed decisions. 

• Focus on cultural and team fit 

Technical skills can often be developed, but behaviours and attitude are harder to change. A stronger recruitment process helps ensure that there is better alignment with company values, stronger team integration and reduces the likelihood of performance or conduct issues. 

Why this matters 

Under the new rules, employers have less flexibility after six months. Poor hiring decisions carry greater legal and operational risk and probation periods must be actively managed, not relied upon as a fallback. 

Impact on Fixed-Term Contracts (FTCs) 

The changes are equally important for employers using fixed-term contracts. Previously, a common approach could be: 

• Offer a 12-month FTC 
• Include a probation period with short notice (e.g. one week) 
• Rely on relatively low legal risk if terminating early 

From 2027, this approach carries greater risk: 

1. Early termination – If an FTC ends after six months, it will be treated as a dismissal, meaning a fair reason and process will be required. 
2. Non-renewal – The expiry of a fixed-term contract is also a dismissal. Employees may challenge non-renewal, so employers must be able to justify the decision. 
3. Probation within FTCs – Where a six-month probation applies, unfair dismissal rights will arise at or around the same point. Any decision to fail probation must be evidence-based, fairly managed, and clearly documented. 

Example Scenario 

Before 2027: 
An employee on a 12-month FTC is dismissed at month 7 with one week’s notice due to performance concerns. This is typically lower risk 

From 2027: 
The same situation could lead to an unfair dismissal claim, and the employer must demonstrate a clear reason, have evidence of review meetings and support provided and must follow a fair and reasonable process. 

FTC Maternity Cover 

Even where there is a clear reason and end date to a contract, such as the return of the substantive employee, this is still considered a dismissal.  Once the individual has six months’ service, employers must show the genuine reason (maternity return) for the contract expiry and be able to demonstrate a fair and transparent process was followed. 

Key Actions 

• Invest in recruitment: Use more robust selection methods and involve the team to improve hiring decisions 
• Review probation periods: Ensure they are appropriate and supported by active performance management 
• Strengthen performance management: Set objectives early, hold regular reviews, and keep clear written records 
• Rethink use of FTCs and plan ahead: Consider suitability of FTCs and plan contract endings carefully 
• Follow a fair process early: From six months onwards, even simple dismissals require a basic fair procedure 

Key takeaway 

These changes shift the focus from length of service to quality of process and decision-making. 

By investing in better recruitment, proactive performance management and fair processes, employers can both reduce legal risk and build a more effective, engaged workforce. 

If you’re reviewing your probation, FTC or recruitment processes in light of these changes, it’s worth starting now. 

If you have any questions or would like to chat about how this applies to you, contact us here.