Unfair dismissal after six months from 1 January 2027: what to change in probation now

For years most employers treated the first two years as a safe period. That ends on 1 January 2027. From that date an employee with six months’ continuous service can claim unfair dismissal. And tribunals will have no ceiling on what they award for lost earnings.

Most of us wrote our probation policies for the two-year rule. Many still run for six months, with the decision in the final week. From January that puts the decision right on the line.

What Parliament changed

Parliament made two changes to the Employment Rights Act 1996 in section 25 of the Employment Rights Act 2025:

• The qualifying period. In section 108 of the 1996 Act, “two years” becomes “six months” (s.25(2)).
• The compensation cap. Section 124 of the 1996 Act, which caps the compensatory award, is repealed (s.25(3)). Today the cap is the lower of £123,543 (set from 6 April 2026 by SI 2026/310) or 52 weeks’ pay.

The government brought both in from 1 January 2027 through SI 2026/559, the Commencement No. 4 Regulations, at regulations 3 and 4. The basic award is unchanged and still worked out on capped weekly pay.

The date that matters is when employment ends

Read regulation 4 twice. The new rules apply wherever the effective date of termination is on or after 1 January 2027, even if the employee was dismissed before that date. The old rules apply only where the effective date of termination falls before 1 January 2027.

The effective date of termination is usually the day notice runs out (s.97(1) of the 1996 Act). Give someone one month’s notice on 15 December 2026 and their employment ends on 15 January 2027. The new rules apply.

There is a second trap. If you end employment without notice, or with less than the statutory minimum, section 97(2) adds the statutory notice on when counting the qualifying period. For anyone with between one month and two years’ service, that is one week (s.86). Take someone who started on 10 July 2026. You pay them in lieu and they leave on 5 January 2027, just short of six months. Add the week and they qualify. The week is not added where you were entitled to dismiss without notice for gross misconduct, but treat it as counting unless you are sure.

Who is caught

• Anyone who joined on or before 2 July 2026 and is still with you on 1 January 2027. They will already have six months’ service that day.
• Anyone on notice now, or about to be, whose notice ends in January or later and who will have six months’ service when it ends, counting the statutory week.
• Every new starter, from the day they reach six months. Count back a week if you might dismiss without notice.
• Senior and higher-paid staff. Their losses were the ones the cap used to limit.

Some claims never needed two years. Employees can bring a claim from day one for dismissal for whistleblowing, pregnancy, health and safety reasons, trade union reasons and the other automatically unfair reasons that need no qualifying period. Discrimination claims need no service at all. The new rules leave those day-one protections in place.

What to change in probation

Probation is a contractual idea, not a statutory one. Passing or failing it has no bearing on the statutory test. In an ordinary unfair dismissal claim, a tribunal will ask one question first: did the employee have six months’ service when employment ended? Design your process around that.

• Length. Keep six months if you like, but make the final decision by the end of month four. That leaves time for notice to run out before six months’ service, counting the statutory week, even with a month’s notice. It also leaves room for a sick day, a postponed meeting or an appeal.
• Reviews. Hold a written review every month, and a formal one at the end of month three, so the employee has a fair chance to improve before the final decision. Set the standard in writing in week one, so the employee knows what they are being measured against.
• Extension. Extending probation can be useful. It does not stop the six-month clock. If you extend past six months, any dismissal needs a fair reason and a fair process. Check your contracts give you the right to extend, and extend before the original end date.
• Documentation. Write down the concern, the support you gave, the improvement you need and the deadline. Share it with the employee. A note written at the time beats a recollection at a hearing. From 1 January 2027 the right to a written statement of reasons for dismissal also starts at six months, so the outcome letter must give the real reason.
• Decision points. Put the month-four decision date in your HR system the day someone starts. Name who decides. Do not rely on the line manager remembering.
• Notice. Check what your contracts say about notice during probation. A short probation notice period only helps if you use it before the six-month point.

The free probation policy template is already updated for 2027. Add the review forms, extension and outcome letters and onboarding checklists with the Onboarding & Probation Pack, for £99 + VAT.

What changes when the cap goes

Under the current rules, a tribunal cannot award more than the lower of £123,543 or a year’s pay for loss. For dismissals with an effective date of termination on or after 1 January 2027, there is no ceiling.

Tribunals will still award only what is just and equitable for the loss the employee actually suffered (s.123 of the 1996 Act). The employee still has to look for other work. But a senior hire who cannot find an equivalent role for two years could recover up to two years’ losses, if the tribunal accepts the loss flows from the dismissal.

That changes settlement maths. If you priced exits against a capped award, reprice them against a realistic view of uncapped loss. You can build the agreement, schedules and companion guide with the Settlement Agreement Pack, from £195 + VAT.

It also raises the value of getting the process right. A fair reason and a fair process remain your best defence. For conduct or performance dismissals, follow the Acas Code of Practice on disciplinary and grievance procedures, in or out of probation. A tribunal can increase an award by up to 25% if you unreasonably fail to follow it. The Disciplinary Process Pack is built to the Acas Code, for £79 + VAT.

What to do before 1 January

• List everyone who will have between six months’ and two years’ service on 1 January 2027. They gain protection that day.
• Check every exit in progress. Work out the effective date of termination, including the statutory week. If it lands on or after 1 January, run a full, fair process.
• Set a month-four decision date for everyone in probation now.
• Update your probation policy, offer letters and contract clauses on extension.
• Brief managers. “They’re still on probation” settles nothing once someone passes six months.
• Reprice any settlement offer where employment will end in 2027.

The full list of dates, fixed and expected, is on the Employment Rights Act 2025 dates page.

This article reflects the law in Great Britain (England, Wales and Scotland) as checked on legislation.gov.uk on 20 October 2026. It is general guidance, not legal advice.