Under the Employment Rights Act 2025, significant changes will be made to the law on unfair dismissal. These reforms are going to have a major impact on employers and the HR processes they have in place. We look at the impact these changes will have on probation periods and what employers need to do about them.
The current legal position
Under the law as it is currently, employees do not gain the right to claim ordinary unfair dismissal until they have completed two years of continuous service. This gives employers considerable flexibility in managing probation reviews and dismissals without the risk of an unfair dismissal claim. However, this will change significantly under the Employment Rights Act 2025 (ERA 2025).
What is changing under the ERA 2025
From 1 January 2027, the qualifying period for employees to claim ordinary unfair dismissal will reduce from two years to six months. This reduction will apply retrospectively, meaning any employee with six months of continuous service as of this date will gain unfair dismissal rights. This shift represents a major change in employment law, and it will have significant implications on how employers manage probation periods and new hires.
The ERA 2025 also extends the time limit for bringing an unfair dismissal tribunal claim from three months to six months, effective from October 2026, giving employees more time to lodge claims.
The risk of an unfair dismissal claim is also increased by the removal of the compensation cap for unfair dismissal claims, effective from 1 January 2027. By removing this cap, the potential award in unfair dismissal claims is unlimited and employers could face paying increased awards.
Impact on probation periods
The reduction to the qualifying period for unfair dismissal will affect how employers manage probation periods. Currently, many employers set probation periods at six months. However, following the upcoming legal changes, this approach will become risky as employees will gain unfair dismissal protection immediately upon completing their probation. As a result, a dismissal for failing a probation period would need to meet the fair and reasonable requirements of the Employment Rights Act 1996, including a full and fair process leading up to the dismissal.
Key areas of risk
Key risks to employers include:
· Delayed probation reviews: if a probation review meeting is delayed or a decision is not made promptly at the end of the probation period, the employee could pass the six-month threshold and gain unfair dismissal rights, making termination more challenging
· Extensions of probation: employers often extend probation periods if an employee’s performance is borderline. However, under the changes to unfair dismissal, extending a six-month probation period would mean any dismissal would fall within unfair dismissal protection
· Fair procedures: with the reduced qualifying period, any dismissal following probation will need to adhere to fair procedures, even if performance concerns arise during probation.
Practical steps for employers
To mitigate risks and prepare for these changes, employers can take proactive steps to review and adjust their practices surrounding probation periods and new hires. Employers should consider shortening probation periods to three, four, or five months. This provides a buffer period to extend probation if necessary or conduct final reviews before the employee reaches six months of service.
Employers should review the length of probation periods, conduct timely probation reviews and ensure fair and transparent procedures. With the right policies and training in place, businesses can mitigate risks and maintain a fair and compliant workplace.
