From 1st January 2027, the qualifying period for employees to bring an unfair dismissal claim will reduce from two years to just six months. Many employers are not yet aware of this significant change, which could have costly consequences if not addressed in time.

How the 6 months new 6 month rule will potentially trip up employers

Most employers currently operate on the understanding that dismissing an employee within their first two years carries minimal risk of an unfair dismissal claim. As a result, it is common practice to set probation periods at six months, for example, or to extend a three-month probation to six months, believing they have more than 6 months in which to take action, or they inadvertently miss the deadline to serve notice to terminate before the end of the 6 month.

How the unfair dismissal time limit could cost you money!

If employers do not update their knowledge and practices, they may inadvertently dismiss employees after six months, wrongly assuming they are protected from claims. This misunderstanding could lead to unexpected and expensive unfair dismissal claims. This could be a double nightmare for Employers because as well as the current 2 year period being reduced to 6 months, on the same day the cap on the compensation which could be awarded is abolished. Currently there is a cap of 52 weeks gross pay or a maximum of £123,543. This will no longer be the case. The awards will be more in line with those for discrimination cases and are unlimited, reflecting an Employee’s actual loss. For example, a senior Employee who is perhaps aged late 50s and earning £150,000 per year there is no limit so if that Employee can prove he has losses of say 2 years pay, because finding another job at their age has proved to be difficult then the Employer could be faced with a cost of 2 years pay, in this case around the £300,000 mark. Both of these changes have the potential to effectively bankrupt a smaller business.

So relying on outdated probation periods or contract terms could expose your business to legal, financial, and reputational risks.

So, what can you do to ensure that you are not caught out?

You should:

  • Review and update your contracts of employment and offer letters to reflect the new rules.
  • Reconsider the length and terms of probation periods for your employees.
  • Seek legal advice before dismissing anyone even within the initial 6 months period.

Taking these steps will help safeguard your business and ensure you are not caught out by the new rules.

How we can help you

To protect your business, send in a copy of your current contracts of employment and your standard offer letter for new employee. Then, book a call or email us to discuss how these documents may need updating in light of the new 6-month unfair dismissal time limit. This will help you identify any areas of risk and ensure your employment practices are up to date.

E mail: mcalvy@pearlbakerlaw.co.uk   or    Tel: 01268 745568