New Hires from July 2026: Unfair Dismissal Changes in 2027

From 1 January 2027, the qualifying period for ordinary unfair dismissal protection drops from two years to six months. This is now confirmed law under the Employment Rights Act 2025, not a proposal working its way through Parliament.

For employers, this is a significant shift, and the practical impact starts well before the new rules take effect. Employees who start employment in early July 2026 may reach six months' service around the time the new regime takes effect. If you're recruiting now, it's worth thinking carefully about onboarding, probation reviews, early performance management and record keeping.

The key message is simple. Probation periods can no longer be treated as a formality.

What is changing?

Under the current rules, most employees need two years' continuous service before they can bring an ordinary unfair dismissal claim. From 1 January 2027, that drops to six months.

There's a second change that matters just as much and often gets overlooked. The statutory cap on unfair dismissal compensation is also being removed from the same date. At the moment, compensatory awards are capped at the lower of a year's gross pay or a set statutory maximum. From January 2027, that ceiling disappears. Tribunals will be able to award compensation based on actual loss, without an upper limit.

Put those two changes together and the picture for employers shifts quite a lot. Not only will employees gain protection much sooner, but the financial exposure if a dismissal goes wrong is no longer capped either.

Employers will still be able to dismiss employees where there's a fair reason and a fair process has been followed. But the shorter qualifying period means less time to assess suitability, address concerns and make informed decisions before that protection applies. And if things do go wrong, the cost of getting it wrong has just gone up.

Why July 2026 matters

An employee who starts in July 2026 will have six months' service right around 1 January 2027. That means employers recruiting now could be hiring people who become protected under the new regime almost immediately.

This isn't a reason to panic or slow down recruitment. It is a reason to be more intentional about how the early stages of employment are managed.

The first six months are typically when employers work out whether a new employee is suited to the role, understands what's expected, fits into the team and can perform to standard. Under the new regime, those judgements need to happen earlier, get documented properly and lead to prompt action when something isn't working.

Probation periods need to be meaningful

A probation clause sitting in a contract doesn't do much on its own. Plenty of employers include one but don't actively manage it. Reviews get missed, feedback stays informal, concerns go unrecorded, and decisions get left until the very end of the probation period.

That approach is about to get a lot riskier.

Probation periods work best when they're structured, consistent and properly recorded. In practice, that means:

• setting clear expectations from day one
• confirming role objectives and standards early
• holding regular check-ins, not just a single review at the end
• documenting feedback as you go, not reconstructing it later
• raising concerns as soon as they appear
• offering support or training where it would genuinely help
• confirming clearly whether probation has been passed, extended or failed
• making the decision before probation actually expires

If concerns don't surface until month five or six, employers may find they've got very little runway left to deal with them properly before unfair dismissal protection kicks in.

Six-month probation periods may need a rethink

A lot of employers currently run six-month probation periods. That length might still make sense for some roles, but it's worth asking whether it leaves enough practical time to assess someone and make a decision before they hit the new six-month unfair dismissal threshold.

For many businesses, something shorter, say three months with the option to extend, works better. It gives managers an earlier trigger point to properly assess performance, rather than drifting toward a decision only once the employee is already close to six months' service.

Notice periods are worth checking too, and this is where employers can get caught out without realising it. For example, if an employee is dismissed at five months and three weeks and they are entitled to one week's statutory minimum notice, their effective termination date may move to six months. At that point, they may acquire protection even though the dismissal decision was made before the six-month mark. Building in a buffer, so decisions are made comfortably before the threshold rather than right up against it, helps avoid this risk.

Managers will need to act earlier

Managers are usually the first to spot problems with performance, conduct, attendance or fit. The trouble is, they often delay the difficult conversation, hoping things will sort themselves out.

Under a six-month qualifying period, that kind of delay gets expensive fast. Managers need to feel confident enough to:

• set expectations clearly from the outset
• hold regular, meaningful probation meetings rather than box-ticking ones
• give honest feedback, even when it's uncomfortable
• write down concerns at the time, not months later
• flag issues to HR early rather than sitting on them
• make a timely, considered recommendation on the probation outcome

A probation process only works if the managers running it are equipped and willing to use it properly. This is often the single biggest gap we see in practice, not a lack of policy, but a lack of manager confidence.

Good records will be essential

If a dismissal is ever challenged, you'll need to show what happened and why. That means records matter, and they need to be created at the time, not pieced together afterwards.

Employers should keep clear evidence of induction and onboarding, training provided, probation meetings, feedback given, concerns raised, support offered, targets set, review dates, any extensions to probation, and the reasoning behind the final decision.

None of this needs to be complicated. A short written note after a probation meeting, sent the same day, will hold up far better than trying to remember what was said six months later.

Recruitment decisions matter more too

With less time to correct a poor hiring decision, the recruitment process itself carries more weight. It's worth checking that job descriptions are accurate, interview questions are relevant, qualifications and experience are properly checked, right-to-work checks are done, references are followed up where appropriate, and hiring decisions aren't rushed just to fill a gap.

Good probation management genuinely starts before the employee's first day.

What employers should do now

You don't need to wait until January 2027 to start preparing. The practical impact is already relevant for anyone hiring from July 2026 onwards.

• Review probation clauses in contracts. Check that probation periods, notice provisions and extension clauses are clear and actually fit for purpose.
• Update probation review processes. Build in structured review points, ideally before the three-month and five-month marks.
• Train managers. Make sure they know how to give feedback, document concerns and escalate issues early.
• Create simple probation templates. Keep them consistent across probation meetings, extensions, outcomes and dismissal letters.
• Act promptly where concerns arise. Waiting until the end of probation to raise something is going to become increasingly risky.
• Review onboarding. New starters should understand their role, standards, reporting lines and expectations from day one.
• Keep proper records. Document meetings, feedback, support offered and the reasoning behind decisions.
• Take advice before dismissing close to the six-month point. If someone's approaching six months' service, get HR or legal advice before making the call.

Frequently asked questions

Does extending someone's probation delay their unfair dismissal rights?

No. Probationary status and statutory unfair dismissal rights are legally separate things. Extending probation doesn't push back the point at which an employee qualifies for protection. If someone reaches six months' service, they're protected, whatever their contract says about probation.

Can we still dismiss someone during probation without a fair process?

You can dismiss more freely before someone reaches the qualifying period, but "freely" doesn't mean without any process at all. Discrimination and certain automatically unfair reasons for dismissal apply from day one regardless of service length, and a basic level of fairness is always sensible practice, not just a legal minimum.

What happens to employees who already have more than six months' service by 1 January 2027?

Employees who already have at least six months' continuous service on 1 January 2027 will gain ordinary unfair dismissal protection from that date. This does not mean past dismissals are reopened, but it does mean employers should review any ongoing probation, performance or conduct issues before the new rules take effect.

Is six months' service always exactly six calendar months?

Broadly yes, but the calculation can be affected by notice periods and how continuous service is counted, which is exactly why cutting things fine near the six-month mark is risky. When in doubt, build in a margin rather than working to the exact date.

Final thoughts

Moving from a two-year qualifying period to six months, alongside the removal of the compensation cap, is one of the bigger shifts in unfair dismissal law in recent memory. It doesn't take away an employer's ability to dismiss fairly. It does mean the early months of employment need to be handled with more structure and more care than many businesses are currently used to.

For anyone hiring from July 2026 onwards, probation management deserves a proper look, not as a compliance exercise, but as a practical way to protect the business and treat new employees fairly at the same time.

If you're recruiting or reviewing your probation process, we run fixed-fee probation policy reviews that check your contracts, notice provisions and review timelines against the new rules, and flag anything that needs updating before January 2027.

Disclaimer: This article is for general HR information only and does not constitute legal advice. Employers should seek legal advice on specific employment law matters or dismissal decisions.