Employment Rights Bill
Unfair dismissal changes
What you need to know
The Current Situation
Currently employees must have two years’ continuous service with their employer before they can bring a claim for unfair dismissal. The exception to this is if the dismissal is for something automatically unfair, like discrimination or whistleblowing. That means employers can usually dismiss someone during their first two years without giving a reason or facing a claim of unfair dismissal (as long as it’s not for a protected reason).
For most small business owners, this qualifying period has been a crucial safety net. It’s given you time to assess new employees properly and part ways fairly easily if things don’t work out – without facing a tribunal claim for unfair dismissal.
That safety net is about to disappear.
What is the Government’s intention?
Initially, the Government proposed removing the 2 year qualifying period completely, making unfair dismissal a day 1 right.
This proposal caused controversy as it would limit employers ability to recruit new hires and dismiss them if their employment didn’t work out.
In November, the Government changed its manifesto and agreed to reducing the 2 year period to 6 months.
How will this work in practice?
The new Employment Rights Act 2025 will reduce the current 2 year period to 6 months.
This will mean employers will still have a small safety net in which to assess and determine if their new hire is right for the business.
When will this be effective from?
This will be effective from 1st January 2027.
What does this mean for employers?
When employers no longer have the 2 year safety net, managing your people is going to be really important.
✅ you will need to review your hiring practices. The way in which you recruit is going to be so important. Ensure you are using the correct tools and techniques to make the right hiring decisions, first time.
✅ any new employee that you hire after the 1st June 2026 will qualify for the new rights after 6 months.
✅ you will need to develop an effective onboarding process to ensure that new employees settle into their roles as quickly as possible and you can start monitoring their suitability.
✅ you will need to effectively manage the probationary period within your contracts of employment to ensure performance is monitored and assessed. Ensure probationary reviews are carried out during the 6 month period. If you don’t have a probationary period in your contracts – then speak to us.
✅ you will need to promptly and efficiently manage any concerning issues with a new employee within the first 6 months, such as conduct, performance, attendance or attitude.
✅ you will need to be prompt in making decisions on whether to retain or end employment during the initial 6 months.
✅ you will need to ensure managers and everyone involved in the hiring process are trained – this also includes training in managing the probationary period, and identifying and raising any concerns at an early stage.
✅ as the period to claim unfair dismissal will reduce, it will have a knock on effect with other processes, such as disciplinary, dismissal, grievances, redundancy and performance. Ensure your policies and processes are robust as employers will not longer be able to rely upon the short service dismissal after 6 months to end employment.
Understanding the unfair dismissal changes
Right now, employees need two years’ continuous service before they can claim ordinary unfair dismissal, although some dismissals, like discrimination, are already day-one rights. This gives you breathing space to assess performance, fit and reliability without the threat of tribunal claims.
The Employment Rights Bill will reduce this period to 6 months.
‘Fair reasons’ for dismissal will remain the same: capability, conduct, redundancy, statutory restriction or ‘some other substantial reason’. But you’ll need to evidence these reasons and follow proper procedures from day one. This change applies to all employees, in all roles, from the moment they start. Whether it’s your new receptionist, sales manager or cleaner, they’ll all have immediate protection against unfair dismissal.
What this means for your business
The financial implications of these changes are stark. Currently, if you dismiss someone with less than two years’ service, they can’t usually claim unfair dismissal (unless for an automatic unfair dismissal reason). From 2026, every dismissal after 6 months service could potentially lead to a tribunal claim, with costs running into thousands, even if you win.
Bad hires will be much more complicated and expensive to correct. You’ll need to be absolutely sure someone’s right before offering them a job, as moving them on will require a full process and documentation after 6 months in the job.
Also, any new employee that you hire after the 1st June 2026 will qualify for the new rights after 6 months.
Your management time will increase significantly. Every performance issue, absence problem or concern about conduct will need proper handling from day one. No more informal ‘this isn’t working out’ conversations. Everything needs documenting.
Many small business owners already find dismissals stressful. Knowing that even your newest employee could bring a tribunal claim adds another layer of anxiety.
Different roles carry different risks. Customer-facing positions where someone could damage relationships quickly, or roles with access to sensitive information, might become particularly risky hires. You might find yourself becoming more cautious about who you’re willing to take a chance on.
How to prepare for the changes
Preparing for these restrictions reqPreparing for these changes means overhauling your existing recruitment processes. You’ll need to get your hiring decisions right the first time. So, invest in better interviewing and more effective pre-employment checks. Here’s what you should focus on:uires a shift in approach and some practical steps. The key is building flexibility and trust into your employment relationships now, before the new rules constrain your options. Here’s what you should focus on:
- Strengthen your recruitment – Develop structured interviews, use consistent scoring methods and always check references thoroughly. Consider practical tests or work trials where appropriate.
- Create robust induction processes – Design clear probationary periods with defined objectives, regular reviews and documented feedback. Make your expectations crystal clear from day one.
- Improve your documentation – Create templates for recording performance reviews, absence meetings and disciplinary issues. Train your managers to document everything correctly from the start.
- Develop fair procedures – Write clear policies for handling performance and conduct issues that work from day one. Include fast-track procedures for probationary periods.
- Train your managers – Ensure everyone who manages staff understands the new rules and knows how to handle issues appropriately. Poor management will become much more expensive.
- Review your contracts – Ensure your employment contracts clearly set out your standards, expectations and probationary arrangements. Consider whether your notice periods need adjusting.
How Hill HR can support you
As your outsourced HR partner, we’ll help you build recruitment processes that minimise the risk of bad hires. From job descriptions to interview templates, we’ll create tools that help you make better decisions the first time.
Our team can design probationary frameworks that work for your business, with clear objectives, review templates and decision-making guides. We’ll ensure you’re using probationary periods effectively within the new legal framework.
We’ll create practical policies and procedures for managing performance and conduct from day one, including fast-track processes for probationary periods. Everything will be tailored to your business and designed for managers without HR expertise.
When issues do arise, we’ll guide you through handling them properly, ensuring you follow fair process and create proper documentation. Our support reduces the risk of successful tribunal claims while keeping your processes proportionate to your business size.
Get ahead of the game
The removal of the two-year qualifying period for unfair dismissal will be one of the most challenging changes for small businesses. But with proper preparation, you can minimise the risks and continue building great teams.
Start adapting your practices now. By the time these changes arrive in 2026, you’ll have embedded new habits that protect your business while still allowing you to manage effectively. Get in touch today to discuss how we can help you prepare for these unfair dismissal changes.
