UK employment law cuts unfair dismissal qualifying period to six months

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UK cuts unfair dismissal period

Highlights

The Employment Rights Act 2025 reduces the qualifying period for ordinary unfair dismissal claims from two years to six months effective January 1, 2027.
The Act eliminates the compensatory award cap for unfair dismissal claims, currently set at £123,543 or 52 weeks' gross pay, starting January 2027.
Employers face increased compliance pressure, needing enhanced probation management and documentation as unfair dismissal rights arise after just six months' service.

How the January 2027 rule changes apply

As reported by the Financial Times, the Employment Rights Act 2025 shortens the qualifying period for ordinary unfair dismissal claims from two years to six months from January 1, 2027. That means an employee who starts a job on July 1, 2026 and remains continuously employed for six months is expected to gain unfair dismissal rights by January 1, 2027.

Olivia Russo, an employment solicitor at JMW Solicitors in London, says the practical effect is significant because employers will then need both a fair reason and a fair process to dismiss someone. She also says the legislation comes as workers face a difficult labour market in which artificial intelligence is often cited as a reason for redundancy.

The Act also removes the current cap on compensatory awards in unfair dismissal cases, now set at £123,543 or 52 weeks' gross pay, whichever is lower. From January 2027, higher earners are therefore no longer expected to face the same compensation ceiling in successful claims.

What it means for employers and staff

Shortening the service threshold is likely to increase pressure on employers to manage probation periods more closely and to document decisions earlier in the employment relationship. Before the six-month qualifying point, employees can still be dismissed lawfully in many circumstances unless they have claims such as discrimination or whistleblowing, which can be brought from day one.

That is expected to make probation a more important compliance stage rather than a routine administrative milestone. Employers are likely to place greater scrutiny on performance, conduct and cultural fit from the outset, while line managers may need more training on performance management, difficult conversations and early identification of concerns.

For businesses, the broader implication is a shift from reactive to proactive employment practices, with record-keeping becoming more important once unfair dismissal rights arise more quickly. For employees with unstable recent work histories, the reform offers earlier legal protection, but it does not remove the risks that still apply in the first months of a new role.

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