Unfair Dismissal Qualifying Period 2027: What Changes in January and What to Do Now

The qualifying period for unfair dismissal has been two years since 2012. For many small employers, that period has functioned as a safety net: a window in which a new hire who is not working out can be let go without the full weight of a tribunal claim. From 1 January 2027, that window closes to six months. This is the biggest change to dismissal law for small employers in a generation. Every business that hires staff needs to understand what changes and what to do before it arrives.

What changes in January 2027

The qualifying period drops from two years to six months. Under the Employment Rights Act 2025, employees will be able to bring a standard unfair dismissal claim after just six months of continuous employment. The compensatory award is uncapped within its existing ceiling of one year's gross pay or £115,115.

A statutory initial period of up to nine months is introduced. The Act creates a statutory initial period for new hires during which employers can follow a lighter-touch dismissal process. You will still need to give a fair reason and allow the employee a basic opportunity to respond. The precise requirements for this period were to be set out in secondary legislation that had not been published at the time of writing. Employers should monitor ACAS guidance as that detail becomes available.

Automatically unfair dismissal does not change. Dismissal for whistleblowing, discrimination, asserting a statutory right or health and safety activity is automatically unfair from day one. This has always been the case and January 2027 does not change it.

The five fair reasons stay the same. Capability, conduct, redundancy, statutory bar and some other substantial reason remain the five potentially fair reasons for dismissal. What changes is that you need a genuine reason and a fair procedure from six months of service rather than two years.

Why this matters for every hire you make now

An employee hired in July 2026 reaches six months of service in January 2027, the same month the qualifying period changes. From that point they can bring a standard unfair dismissal claim. This is not a future problem for future hires. It applies to the people you have employed in the last few months.

Employers who have been operating on the assumption that staff within their first two years carry low tribunal risk need to recalibrate that assumption now. The cost of a defended tribunal claim, including legal fees, is typically between £5,000 and £15,000 regardless of the outcome. The compensatory award for a successful claim can reach £115,115.

What a fair dismissal requires after January 2027

A fair reason. You must be able to show that the dismissal falls within one of the five fair reasons. For a new hire who is underperforming, the fair reason is capability. For a new hire who has misconducted themselves, the fair reason is conduct. You need evidence to support the reason you rely on.

A fair procedure. Even with a fair reason, dismissal without a fair procedure will generally be unfair. During the statutory initial period the procedure is lighter touch. Outside that period the full ACAS Code of Practice on Disciplinary and Grievance Procedures applies. The Code requires investigation, a formal hearing, the right to be accompanied, and the right of appeal.

Documented evidence. A tribunal will ask whether you had evidence to support the fair reason you relied on and whether that evidence was gathered through a reasonable process. A dismissal that lacks documentation is difficult to defend even where the employer had genuine grounds.

The financial cost of getting it wrong

Compensatory award. This covers the employee's financial loss: lost earnings, pension and projected future loss. Capped at the lower of one year's gross pay or £115,115. For an employee earning £35,000 per year, that ceiling is £35,000 per year of service post-dismissal.

Basic award. Calculated on age, length of service and weekly pay, subject to the statutory cap on weekly pay. For an employee with six months of service the basic award is modest but not zero.

ACAS uplift. Where the employer failed to follow the ACAS Code, the tribunal can increase the combined award by up to 25%. This applies where an employer skipped the investigation, did not hold a hearing or denied the right of appeal.

Legal costs. Employers generally pay their own legal costs regardless of outcome. A defended hearing costs between £5,000 and £15,000 in solicitor fees for a small employer.

What to do before January 2027

Extend your probation period. Change your standard probation period from three months to six or nine months. Update your employment contracts to reflect this. The statutory initial period aligns with a probation period of this length.

Build a paper trail from day one. Record attendance, performance issues and conduct matters from the first week of employment. A dismissal that is not supported by documented evidence is difficult to defend even during the statutory initial period.

Follow a procedure for every dismissal. Even in the statutory initial period, give a reason, hold a meeting and allow the employee to respond. This takes less than an hour and reduces your tribunal risk significantly.

Update your contracts before you next hire. Extended probation periods, clear performance standards and a reference to your disciplinary process in the contract will all support you if you need to dismiss during or shortly after the initial period.

Take advice before dismissing any employee with more than four months of service after January 2027. The margin for error is much smaller than it has been. The cost of professional advice before dismissal is almost always less than the cost of defending a claim after it.

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