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One of the flagship policies introduced in the Employment Rights Act 2025 (ERA) significantly reduces the qualifying period for legal protection against unfair dismissal.
Understanding the changes can allow your business to stay compliant and reduce the risk of compensation claims.
What do the changes mean?
Under current legislation, employees need two years’ continuous service before they can claim compensation for unfair dismissal.
From 1 January 2027, this qualifying period for protection will drop to six months.
While the changes are yet to come into force, any employee hired after 1 January 2025 will have a shortened qualifying period.
For example, a worker starting on 1 January 2026 will only have a year until they gain full workers’ rights and those starting after 1 July 2026 will only need the minimum six months.
Unfair dismissal tribunals will also not be limited to an upper threshold for compensation awards.
Where unfair dismissal compensation is currently the lower of £123,543 or 52 weeks’ pay, the monetary cap on tribunal compensation will be removed.
How should I respond?
A top priority should be putting the processes in place to ensure organisational fit and performance is fully assessed in advance of the six-month threshold.
Auditing start dates of employees can account for new hires who will have instant protection under the new regime and existing employees whose qualifying period will be shortened.
This involves reviewing contracts and probationary periods, making sure they reflect ERA deadlines before starting the recruitment process.
The standard industry advice is that probation periods should now be four months long, with a final decision made by the end of month five.
Any evaluation of an employee’s suitability should be thoroughly recorded throughout their qualifying period, including any feedback and support provided.
Managers should also be trained on how to give direct feedback and handle underperformance immediately, keeping clear records of reviews and warnings.
You should also consider how the effective date of termination might overlap with an employee being granted full protection from unfair dismissal.
For example, a worker could be half a week away from reaching the qualifying period, but then told their contract is being terminated.
The statutory minimum notice will likely bring their termination date over the six-month mark, allowing them to submit an ordinary unfair dismissal claim.
How can a lawyer help?
By reaching out to one of our legal experts, we can perform an employment law audit to identify risks to your business that the ERA might bring.
We can review contracts to make sure probationary periods fall within the six-month mark and performance management procedures are up to date.
Any dismissal procedures will be double-checked, ensuring your business handles underperformance and conduct issues compliantly.
Get in contact today for an employment law audit.
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