For years, many employers have relied on a simple rule: an employee can’t usually claim unfair dismissal until they’ve worked for you for two years. That changes on 1 January 2027, when the qualifying period drops to just six months.

This is one of the biggest changes in the Employment Rights Act 2025. The good news is there’s still time to prepare, and it doesn’t need to be complicated.

What’s changing?

  • The qualifying period falls from two years to six months. This applies to dismissals that take effect on or after 1 January 2027.
  • It affects your current team, not just new starters. Anyone who joined you on or before 1 July 2026 will already have six months’ service by 1 January 2027, so they’ll be protected from day one of the new rules.
  • The cap on compensation is being removed. At the moment, unfair dismissal compensation is limited to the lower of a year’s pay or a fixed statutory amount. Once the change comes in, there will be no cap, so getting a dismissal wrong could cost a lot more.

Why this matters for small businesses

In practice, the first six months of employment become your main window to decide whether someone is right for the role. After that, any dismissal will need a fair reason and a fair process, just as it does for long-serving staff now.

The change doesn’t stop you managing your team. It means good HR habits matter much earlier on.

Five steps to take before January

  1. Review your probation periods
    Probation periods of three to six months are common. It’s sensible to keep yours comfortably within the six-month window so you have time to make a decision, and to extend probation if you need to, before full rights kick in. Make sure your contracts say clearly how long probation lasts and how it can be extended.
  2. Hold regular check-ins
    Don’t save everything for the end-of-probation review. Short, regular meetings, for example at one, and three months, give new starters clear feedback and a fair chance to improve.
  3. Write things down
    If concerns come up, record them along with the support you’ve offered. A short note after each meeting is often enough. With tribunal time limits now extended to six months, good records matter more than ever.
  4. Train your managers
    Line managers are usually the first to spot problems and the most likely to handle them informally. Make sure they know your process and when to ask for HR support.
  5. Check your policies
    Your disciplinary, capability and grievance procedures should be clear, up to date and followed consistently. Acas has a Code of Practice on disciplinary and grievance procedures, and following it is a strong place to start.

Don’t forget your existing team

Because the change affects people already working for you, now is a good time to look at any ongoing performance or conduct issues. Dealing with them fairly and promptly is better for everyone than letting them drift.

How Advise HR can help

We help businesses of all sizes put simple, practical HR processes in place, from well-written contracts and probation procedures to manager training and support with difficult conversations. We’ll never try to scare you. We’ll help you understand what the change means for your business and what to do about it.

If you’d like a quick review of your probation process or contracts before January, call us on 07415 516 365 or email.

This article is for general guidance only and doesn’t replace advice specific to your situation.

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