Right now, an employee generally needs two years of service before they can claim ordinary unfair dismissal. That two year cushion is how many small employers survive hiring mistakes: if it is not working out in the first year or so, you can usually part ways with limited legal risk.
From 1 January 2027, that cushion shrinks to six months. And at the same time, the cap on unfair dismissal compensation is removed entirely. (Acas: Employment Rights Act 2025.)
What this actually means
Today, a hiring mistake discovered at month nine is fixable. From January 2027, an employee at month seven who is dismissed without a fair reason and a fair process can take you to tribunal, with no ceiling on what a tribunal can award for lost earnings. For a five person business, one badly handled dismissal could be an existential problem, not an unpleasant one.
Two further changes make this sharper. Tribunal claim deadlines double from three to six months in October 2026, so claims can arrive long after the dismissal. And "fire and rehire" becomes automatically unfair in most cases from January 2027, closing off a route some employers used to change terms.
Probation stops being paperwork
The window for assessing whether someone is right for your business is about to become the first six months, full stop. That makes probation the single most important process in your business. A probation period that exists only as a line in the contract, with no reviews, no notes and no feedback, will not protect you.
What a defensible probation process looks like:
- A contract that sets it up properly: length, extension rights, and a shorter notice period during probation.
- Scheduled reviews: at minimum, a midpoint and an endpoint conversation with honest feedback, recorded on a probation review form.
- Written outcomes: pass, extend or exit, with reasons. If you exit someone, the notes from those reviews are your evidence that the decision was fair and considered.
- No drift. The silent probation pass, where the end date sails by unnoticed, becomes genuinely risky when month seven carries full dismissal rights.
And when problems appear after probation
From 2027, performance problems in month eight need the same discipline as problems in year three: a fair process, documented support, and a genuine chance to improve, usually through a performance improvement plan, before dismissal is considered. The days of "it's under two years, we can just let them go" are ending.
Get ready in three moves
- Tighten your contracts now so every new hire from here on has a properly drafted probation clause. Anyone hired from July 2026 will still be within six months of service when the law changes.
- Run real probation reviews and keep the forms.
- Have a performance process ready before you need it.
Our Starter Bundle includes a Contract of Employment with a robust probation clause, and the Complete Bundle adds the Probation Review Form, Performance Improvement Plan and full disciplinary procedure: everything above, professionally drafted for England and Wales and updated for the Employment Rights Act 2025. If a specific situation is already brewing, talk to Cynthia before you act, not after.
Guidance for employers in England and Wales, not legal advice. Implementation details remain subject to government consultation. We will update this article if dates or details change.