Probation periods may need to change now as retrospective effect of unfair dismissal regulations applies

On 1 January 2027, provisions of the Employment Rights Act 2025.

These regulations will reduce the qualifying period of employment for bringing an ordinary unfair dismissal claim under the Employment Rights Act 1996 from two years to six months.

Employers who operate a six-month probation period must act now as the legal change will apply retrospectively so that all employees with six months’ service or more on 1 January 2027 will have access to unfair dismissal from that date.

Therefore, anyone onboarded with a six-month probation period from 1 July 2026 could bring a claim relating to the end of that probation period if their employment is terminated at six months without satisfying the requirements of s.98 of the Employment Rights Act 1996.

The regulations confirm that the changes will apply in any case where the effective date of termination (EDT) is on or after 1 January 2027. This means that the provisions will apply in situations where the date of dismissal is before 1 January 2027, but the EDT falls on or after this date because minimum statutory notice has not been given to the employee.

Actions to mitigate this risk include:

• reducing the contractual probation period, e.g. to three/four months, to give time at the end of the period to extend the probation or terminate the employment without ordinary unfair dismissal rules being an issue

  
  

• retaining a six-month probation period on the understanding that if termination becomes necessary, it will need to be supported by the same processes as currently required for employees with over two years’ service.

  
  

  This means, e.g. satisfying the requirements of the Acas Code of Practice and building upon warnings before terminating for a conduct issue. Failure to do so could result in an unfair dismissal and an uplift of any compensation by up to 25%.

  
  

Also coming into force on 1 January 2027 are provisions that remove the upper cap on compensatory awards in unfair dismissal cases, potentially making these claims more expensive. However, it is not common for unfair dismissal awards to be over the current cap of the lower of a year's pay or £123,543, so the impact may be limited.

The Department for Business and Trade will produce guidance for employers to help them understand the likely practical implications of the changes in due course.

Annotate.

contact hr@inlcudehr.com now for more information