Webinar Summary: New Unfair Dismissal Requirements: What Employers Must Do to Comply

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On this page

• Introduction
• What Is Changing in the Law?
• Removal of the Compensation Cap
• Extension of Tribunal Limitation Periods
• Extension of ACAS Early Conciliation
• Why Probationary Periods Are Now More Important Than Ever
• How to Manage Probation Effectively
• Following a Fair Process
• Documentation and Written Outcomes
• The ACAS Code of Practice
• The Risks of Getting It Wrong
• Best Practice Checklist for Managing Probation
• Key Takeaways
• Questions and Answers
• How LegalVision Can Help

Introduction

Elliot Moore: Welcome to our webinar on new unfair dismissal requirements and what employers must do to comply. I am joined by Saeidul, a practice leader in our employment law team, who is going to be discussing today’s points, including relevant changes to the law and the importance of probationary periods.

Saeidul Haque: Thank you, Elliot. Employee terminations can be a high-risk decision for any business. Getting it wrong can lead to costly employment tribunal claims and disputes, reputational damage, and low morale amongst existing staff.

This is particularly relevant because employment tribunal matters are public, and there is a public record for all judgments that are issued. With social media in this day and age, incidents that may seem trivial can often lead to very negative public headlines.

This webinar covers the upcoming change to unfair dismissal law, the practical steps employers can take to minimise the risk of disputes, and some key takeaways.

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What Is Changing in the Law?

Saeidul: From 1 January 2027, the qualifying period for ordinary unfair dismissal claims will be significantly reduced. It will change from two years’ continuous employment to just six months.

This represents a fundamental shift in employment law. Currently, employees dismissed before completing their two years of service have very limited protection. They can only really bring claims for whistleblowing or discrimination, and potentially wrongful dismissal as a contractual claim. The vast majority of dismissals within the first two years go unchallenged and do not usually lead to a dispute.

Under the new regime, an employee with at least six months of service will have the right to claim unfair dismissal.

What This Means for Employers

Saeidul: Employers will face potential tribunal claims much sooner in the employment lifecycle, when performance issues, capability concerns, or other problems such as cultural fit can typically arise.

Tribunals will closely examine dismissals that previously fell outside their jurisdiction entirely. Employers who have become accustomed to dismissing an employee within the two-year window without any process will need to radically change that approach.

This change brings the UK closer to the position in many other jurisdictions and reflects a long-standing call from unions and employment rights groups. It has been slightly watered down compared to what was originally anticipated, which was that unfair dismissal was going to be a day-one right. As it passed through Parliament, it still requires some length of service before a claim can be brought, which is a good thing, albeit still a relatively short period.

Removal of the Compensation Cap

Saeidul: Alongside the reduction in the qualifying period, the government has also lifted the compensation cap for unfair dismissal claims. At present, this is capped at the lower of one year’s gross pay or a statutory maximum set annually by the government, usually in the low six figures.

The removal of this cap means the financial risk of getting a dismissal wrong will rise significantly, particularly with high earners. Employers will need to weigh the financial risk of an unfair dismissal claim much more carefully from 1 January 2027, particularly when dismissing anyone in the six-month to two-year bracket, or those on higher salaries.

Extension of Tribunal Limitation Periods

Saeidul: Supplementary to these changes, and perhaps not receiving the headlines they should have, is the extension of limitation periods for bringing employment tribunal claims later this year.

At present, the time limit to present most claims is three months less one day from the date of the act complained of, or in the case of dismissal, from the effective date of termination. For example, if a dismissal took place on 2 March 2026, the limitation period to bring a claim for unfair dismissal would currently be 1 June 2026.

This has long been criticised as one of the shortest limitation periods in civil litigation. In most cases in civil litigation, we are looking at years as opposed to months.

From October 2026, the employment tribunal limitation period will be extended to six months for most claims. Employees will now have twice as much time to bring tribunal proceedings.

What This Means in Practice

Saeidul: This change will:

• Reduce pressure on claimants to issue premature claims
• Allow more time for internal resolution where possible
• Create more opportunity for early conciliation through ACAS
• Give claimants more time to take legal advice

Often in the employment tribunal system, claimants are litigants in person, meaning they have no legal representation. That may change moving forward, because they will have more time to consider their position and potentially more time to accumulate finances to fund a claim. We may see more employees taking legal advice in the future.

The current three-month time limit has also sometimes been exploited by employers through drawn-out processes, but the six-month window will reduce that scope.

Extension of ACAS Early Conciliation

Saeidul: Another change already implemented, and again one that may not have received headlines, is that as of 1 December 2025, the ACAS early conciliation process was extended from six weeks to 12 weeks.

ACAS is the body that oversees employment disputes. They are the first party that needs to be approached before a matter can be escalated to the employment tribunal. They are there to try to mediate the issues where possible. The government has given them more time, double the amount in fact, to try to achieve that.

The Risks of Delayed Hearings

Saeidul: While claimants will have longer to bring claims, the passage of time increases the associated risk of fading memories. There is currently a significant backlog in employment tribunal claims. I am dealing with one at the moment where we received a claim in 2024 and it has been listed for a hearing in 2027.

The risk of fading memories is very real because of the significant passage of time. Documents may be lost during that period due to retention processes, system changes, and other reasons.

A point that is often missed is witness availability. In three years, you might have a significant shift in terms of who you still employ. Employees may have come and gone, so calling upon them as a witness may be very difficult when they are no longer your employee. This applies to both the claimant and the employer as a respondent.

Early, proactive evidence gathering is essential, but early resolution is equally important. Taken together, these changes will create a more claimant-friendly environment.

Why Probationary Periods Are Now More Important Than Ever

Saeidul: With the qualifying period for unfair dismissal dropping to six months, probationary periods have become more important than ever for managing employment risk and the employment relationship.

At the moment, probationary periods carry no special status beyond perhaps having a different notice period when someone is in probation compared to outside it. The key point for most employers is the two-year mark, because once someone reaches that, they can claim unfair dismissal.

Who Is Affected by the Changes

Saeidul: From January 2027, probation periods become significantly more important. Most probation periods typically last between three to six months. Under the old regime, an employer had two years to try to dismiss an employee with minimal process. That safety net will be gone from 2027, so any employees who complete probation will likely have enough service to claim unfair dismissal from 1 January 2027.

This is important because it affects:

• Any hires from 1 July 2026 onwards, who will be the first cohort with six months of service by 1 January 2027
• Anyone currently in your business who has between six months and under two years of service by 1 January 2027

For example, if you hired someone on 1 January 2026, by 1 January 2027 they only have one year of service. Because of the law changes, they can also bring a claim of unfair dismissal. If you have someone in your company at the moment that you are unsure of, early intervention is probably better than waiting until the law changes, because that will carry much more risk.

For those in their probationary period, this is potentially the last opportunity to dismiss with a lower risk of tribunal claims compared to after the qualifying period expires.

How to Manage Probation Effectively

Saeidul: A probationary clause in an employment contract is not enough on its own. To manage the risk, employers need to take a series of practical steps.

Set Clear Expectations from Day One

Saeidul: Employees need to know what success in their role looks like. It is no good saying, “This is what we want.” They need to know exactly what is expected of them, so it will not come as any surprise if a decision is made to dismiss them.

Monitor Performance Regularly

Saeidul: Consider regular intervals such as at the one-month mark, two months, three months, and so on. It could be monthly, or it could be one month, three months, the fifth month and beyond. Whatever cadence works for you, the important point is that performance is reviewed regularly and you are providing ongoing constructive feedback covering what they are doing well and what they are not doing so well.

These reviews should be documented in writing. That way, it will not come as any surprise to an employee. You will have a paper trail to demonstrate what has been discussed, what has been actioned, and what has not been actioned.

Document Everything

Saeidul: Tribunals are generally quite sceptical if things are not documented, particularly if they are only documented after a claim is brought. Contemporaneous records are very important.

Provide Genuine Support

Saeidul: Give employees a fair chance at the role you recruited them for. Recruitment comes at a cost to businesses, whether through recruiters, marketing, or otherwise. Equally, the employee depends on the payment from their employer.

Typically, it takes around three months for an employee to get used to the systems, processes, and way of working. After that, they should have a good idea of what is expected of them. Give them at least that period of time to prove themselves and to improve. Support can include:

• Regular supervision meetings
• Training, particularly when someone is new
• Shadowing other employees in similar roles

Following a Fair Process

Saeidul: If you are going to terminate, even during probation, employees should be told of any concerns, given a chance to respond, and provided with clear reasons for dismissal.

Once an employee has six months of service from 2027, dismissal will carry the risk of an unfair dismissal claim, even if they are still on probation (for example, if it was extended). To follow a fair process, you need:

1. A fair reason for dismissal: This could be capability (performance reasons), conduct, or potentially redundancy (although that is more unlikely during the initial phase of employment).
2. A reasonable decision in the circumstances: Have you genuinely explored alternatives to dismissal? Is dismissal the only option?
3. A fair procedure: This includes investigation, formal hearing, outcome, and appeal rights.

Being on probation may justify a shorter process, even after January 2027, but it does not remove the need for fairness, clarity, and consistency.

The Process Step by Step

Saeidul: The recommended process for identifying and managing issues includes:

• Probation review meetings: Frank discussions with the employee about what they are doing well and where they need to improve. What support do they need? What can you do to assist them further?
• Formal hearing: If you are still not seeing progress, move to a probation decision meeting or hearing. Go through the issues, give the employee an opportunity to explain themselves, and consider the outcome.
• Outcome: If you are not satisfied with the response, the outcome could be dismissal.
• Right of appeal: In most cases, the right of appeal should be offered.

You should also follow internal processes. If you have an internal disciplinary policy and a disciplinary issue occurs during probation, follow it. The same applies to capability policies. Consistency and fairness are paramount.

Be Careful Not to Set Negative Precedents

Saeidul: Be mindful not to create precedents based on past cases, particularly if they were not dealt with properly. If you set a good example in the first case, it will make things easier to justify in the future, rather than someone saying, “Well, you treated Joe Bloggs differently. Why am I being treated this way? Is it because of a protected characteristic?” Consistency removes that doubt.

Building Towards Dismissal

Saeidul: Depending on the reason, you would usually build towards a dismissal. Even during probation, you might issue warnings noting that if performance continues as it is, there is a danger of failing probation. You could go as far as issuing a written warning, or a final written warning, if you are having those monthly or bi-monthly meetings.

When a Full Process May Not Be Required

Saeidul: In some cases, this full process is not required. This might be because of:

• Seriousness of the offence: If someone has committed an act of gross misconduct, following the full process could be futile.
• Practical relevance: If during probation someone loses their right to live and work in the UK, it would be illegal to continue employing them. Following a process of warnings would be pointless, because unless their right-to-work status changes, warnings will not change anything.

Ideally, some process is followed before reaching that point, but dismissal might be the first option as opposed to the last in those circumstances.

Documentation and Written Outcomes

Saeidul: Try to document everything. Get employees to sign meeting minutes where possible so they can confirm it is an accurate reflection of the discussion. With technology these days, you can transcribe meetings if you hold them virtually, which more and more remote-first businesses are doing. Just be mindful of GDPR. Make sure you have the correct privacy policies and other documentation in place to be compliant.

If you decide to proceed with termination, even during probation, issue an outcome letter with written reasons. For example, if the reason is performance, make it very clear:

• Why they have not been performing
• What you have done to help them
• How they have fallen short of expectations

You might reference specific KPIs and scores in months one, two, and three, showing there has been no real improvement compared to what would have been expected at that length of service.

The ACAS Code of Practice

Saeidul: The ACAS statutory Code of Practice on Disciplinary and Grievance Procedures is important. If the reason for dismissal during probation is a disciplinary or grievance matter, you need to try to follow the Code where possible.

If a matter is escalated to a tribunal, the tribunal can adjust certain awards by up to 25% for any unreasonable failure to follow the Code or any provision within it.

For example, if you had a disciplinary matter with an employee and did nothing at all with it before dismissing them, even if it was not quite gross misconduct, a tribunal may find that you unreasonably failed to follow the guidance set out in the Code (which is essentially: investigation, formal hearing, outcome, and appeal rights). If the tribunal concludes that you should have followed those steps and did not, they can increase the award by up to 25%.

Conversely, if an employee unreasonably fails to follow the Code’s guidance, for example by being obstructive or not participating in meetings, a tribunal can reduce any awards to them by as much as 25%.

The Risks of Getting It Wrong

Unfair Dismissal Claims

Saeidul: Not following a fair process puts the company at risk of an unfair dismissal claim. From January 2027, anyone with six months of service can claim unfair dismissal. The risk increases if you skip steps or fail to investigate properly.

Wrongful Dismissal

Saeidul: This is essentially a claim of breach of contract, often where the employer has failed to give proper notice or payment in lieu of notice. Always check the contract terms. The dismissal itself may have been correct, but it was wrongful because notice should have been given. It sounds counterintuitive, but these situations do arise.

Discrimination Claims

Saeidul: Discrimination claims have no service requirement, even after January 2027. These can be very costly because in some cases the awards are uncapped. Always avoid decisions based on a protected characteristic, and always document objective reasons for dismissal such as performance or conduct. Reasons such as “your religious beliefs do not align with our company’s beliefs” would be highly problematic and would certainly expose you to a tribunal claim.

Reputational Risk

Saeidul: Tribunal matters can be messy and very public. Local journalists sometimes report on them, or are tipped off by disgruntled claimants. If journalists turn up to a hearing, take notes, and report on it, they are free to do that. This can have significant negative reputational consequences. If you can resolve things early, that is what you should try to do.

Best Practice Checklist for Managing Probation

Saeidul: To minimise risk under the new regime, employers should:

• Conduct proper investigations through probation review meetings, monthly, bi-monthly, or as appropriate.
• Allow employees to be accompanied at formal meetings by a fellow employee or trade union representative. Where an employee has a disability such as a learning disability, you may want to consider allowing a family member or friend to accompany them, with appropriate caution.
• Be consistent by treating similar cases similarly. Avoid situations where an employee can argue they were treated differently to a colleague.
• Keep contemporaneous records of all meetings, decisions, expectations set, and training delivered.
• Ensure decision makers are impartial where possible. Sometimes a line manager has tunnel vision, whereas someone outside the relationship may have a broader view.
• Give employees adequate time to prepare for meetings and a genuine opportunity to explain their behaviour or performance. There may be something going on at home, or they may feel they have not had enough training or support.
• Offer a genuine right of appeal, ideally to someone who has not been previously involved in the decision. In small businesses without that luxury, do what is possible.
• Explore alternatives to dismissal. For example, if someone is not cut out for management, could they be redeployed elsewhere? Could the probation period be extended to give them more time? This can be a frank conversation with the employee during the early stages of the relationship.

Key Takeaways

Saeidul: Carefully and constructively manage the probation period. Keep records, be consistent, and follow documented processes with regular monthly or bi-monthly meetings.

Early intervention is often best. After three months you usually have a good idea whether someone will pass or fail probation. As you approach the six-month mark, you may want to make the decision earlier to avoid exposure to an unfair dismissal claim, even where you have followed a fair process.

You need both a fair reason and a fair process. In probation-based dismissals, the reason is usually performance, though it could be cultural fit or other factors.

Provide clear written reasons and offer a right of appeal where appropriate. The right of appeal will not be appropriate where, for example, someone has lost their right to work in the UK and that status will not change.

Some cases are more complex than others. You might have employees with a disability that explains performance issues. It is always best to seek legal advice before proceeding, to avoid unnecessary risk and to protect the business as effectively as possible.

Questions and Answers

Elliot: Saeidul, thank you. We have had quite a few questions come through, so let’s go through as many as we can.

Question: Does the law change in January 2027 affect anyone employed from July 2026, or only those employed from January 2027 onwards?

Saeidul: It will impact any hires from 1 July 2026 onwards. Anyone who reaches six months of service by 1 January 2027 will be able to claim unfair dismissal. It also includes anyone already in your business with six months or more service but under two years at the point the law changes.

For example, if someone joined on 1 January 2026, they will only have one year of service by 1 January 2027. Because the law is changing, they also benefit from the new regime and can make claims of unfair dismissal if their employment is terminated. If you are considering making decisions about an employee’s employment, it is better to do that now before the law changes, because afterwards it will no longer be relatively risk-free.

Question: Have the timeframes around redundancy changed as well?

Saeidul: The timeframes around redundancy have not changed. Statutory redundancy payments still require at least two years of service. The change is purely in relation to whether someone can bring a claim for unfair dismissal. If someone is made redundant with six months of service, they cannot claim redundancy pay, but they can claim unfair dismissal.

Question: Our probation period is currently six months. Should we reduce it to three months with the option to extend, so we can more easily dismiss someone not working out?

Saeidul: You could change it, but it is not strictly necessary. You can keep it at six months and hold normal probation meetings, just making the decision sooner.

There are also options around notice periods. Depending on how your contract is written, you may be able to pay someone in lieu of notice, meaning they leave immediately upon termination but get paid for the notice period.

For example, if an employee has a three-month notice period and you are worried that a decision after three months would push them past the six-month threshold, paying in lieu would mean they leave immediately. The drawback is you do not get the benefit of their notice period, but the benefit is they leave quickly, they do not accrue holiday during that time, and they cannot claim unfair dismissal because they do not reach the six-month mark.

Question: If you dismiss someone within the six-month probationary period, does the notice period have to sit within that period, or can you dismiss at six months and still sit within the non-qualifying period?

Saeidul: The notice period must be taken into account. If you dismiss after six months and the employee works their notice period and leaves in month seven, they can claim unfair dismissal.

The recommendation is to make the decision around the fourth or fifth month. The employee works up until just under six months of service, meaning they do not qualify to bring a claim. Alternatively, pay in lieu of notice so they leave immediately and cannot reach the six-month mark.

Question: If we extend the probation period, can we still follow normal probation review processes to end employment due to failed probation, even after six months?

Saeidul: Yes, you can. But be mindful that if you get it wrong, the employee could bring an unfair dismissal claim from January 2027.

Documentation and regular meetings are very important to show the decision-making process, including any warnings given to the employee, the steps you needed them to take to rectify the situation, and how they have fallen short of expectations.

These changes do not mean you cannot dismiss someone. You can still go through the normal process, but it needs to be more detailed than most employers are used to at present.

Question: Even if we get everything right, could an employee still bring a claim?

Saeidul: Yes, they can. However, there are ways to manage claims that have little to no reasonable prospects of success. Getting the claim dealt with early in those circumstances is important to save time, costs, and potential reputational damage from a claim with no merit.

How LegalVision Can Help

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