Our recent Employment Rights Act roadshows attracted a fantastic audience of HR professionals, business leaders and people managers, generating lively and insightful discussion around the practical impact of the forthcoming reforms. Employment partner Rebecca Cockerill chaired the Cambridge event and, in this article, explores the key discussion points on the unfair dismissal reforms and considers what employers can do to prepare for a new unfair dismissal landscape.
The Employment Rights Act 2025 will introduce one of the most significant changes to unfair dismissal law in decades. Currently, employees are required to have two years’ service to bring an ordinary unfair dismissal claim in the Employment Tribunal. Due to changes made by the Employment Rights Act 2025, this will reduce to six months’ service where the dismissal is deemed to occur on or after 1 January 2027 (this date may be impacted by the rules around extensions where statutory notice has not been provided). Similarly, the statutory cap on the unfair dismissal compensatory award will be removed for unfair dismissal claims where the dismissal occurs on or after 1 January 2027.
This was a hot topic at our recent Employment Rights Act roadshow in Cambridge. Reduction in the period of qualifying service needed to bring an unfair dismissal claim has a knock-on effect on how long probationary periods should be, how probationary periods should be managed and how dismissal processes should be conducted.
One option, of course, is to remove probationary periods and follow a fair dismissal process for all, regardless of length of service. However, a recurring theme throughout our Cambridge roadshow was how important recruitment and probationary processes are to businesses in assessing suitability. Most delegates felt that probationary periods will continue to play a key role and had already reduced the length of their probationary periods to 3 or 4 months to account for the upcoming changes (bearing in mind that someone starting in July 2026 will obtain unfair dismissal rights in January 2027).
The discussion quickly moved beyond legal compliance and focused on practical realities. Delegates highlighted the difficulty of ensuring that managers identify performance concerns early, hold challenging conversations when necessary, and make informed decisions within probationary timeframes. Several attendees noted that performance concerns are often not addressed until late in the probationary period, limiting the organisation's ability to take timely action. Delegates felt these issues would likely be exacerbated by shorter probationary periods.
For some businesses, the consequences of making the wrong recruitment decision are particularly significant. Employers recruiting internationally, sponsoring Skilled Worker visa holders or investing heavily in relocation packages emphasised the financial and operational risks associated with shorter probationary periods and unsuccessful hires.
One clear message was that the risk of the unfair dismissal changes will depend heavily on manager capability. Many delegates suggested that organisations should focus on providing managers with practical tools, including structured probation frameworks, clear guidance on documenting concerns, and training on how to manage probationary periods and conduct effective performance conversations. There was also broad agreement that people management cannot remain solely a HR responsibility. Instead, managers will need to take ownership of employee performance, with HR providing support, coaching and oversight.
As employers prepare for these changes, the key challenge is likely to be cultural rather than legal. Organisations that invest now in developing managers, embedding effective feedback and probationary processes, and creating a culture of early intervention are likely to be better placed to navigate the new unfair dismissal regime. The discussions at our Cambridge roadshow highlighted a clear consensus among attendees: the greatest risks arise not from a lack of understanding of the law, but from weaknesses in day-to-day people management. While the legal framework may be changing, good management practice remains one of the most effective risk management tools available to employers.
Although it was not discussed in detail during our Cambridge roadshow, the proposed removal of the cap on the unfair dismissal compensatory award could also have significant practical implications for employers. Employees and senior executives may find themselves in a stronger position during settlement negotiations, given the potential to recover a broader range of losses through Tribunal proceedings, including pension losses, bonuses, long-term incentive plan awards and other benefits. While many senior executives may still prefer to avoid litigation, the prospect of uncapped compensation could influence negotiating dynamics, potentially leading to longer settlement discussions, higher settlement costs and more complex exit processes. Combined with the change in qualifying service, it has the potential to increase both litigation risk and the cost of resolving employment disputes. Employers should therefore consider reviewing their approach to senior exits, settlement negotiations and litigation risk, particularly where bonus arrangements, long-term incentive plans and significant pension benefits are involved.
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