One of the biggest UK employment law changes for 2027 is getting closer.

From 1 January 2027, the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months.

This is a significant change for employers, particularly SMEs that may have traditionally used the first year or two of employment to assess whether somebody is the right long-term fit for the business.

The new six-month qualifying period means recruitment, probation management, performance conversations and HR record keeping will become even more important.

What is changing with unfair dismissal in 2027?

Under the current rules, employees generally need two years’ continuous employment before they qualify to bring an ordinary unfair dismissal claim.

There are already important exceptions. Some claims, including certain automatically unfair dismissals and discrimination claims, do not require two years’ service.

From 1 January 2027, the ordinary unfair dismissal qualifying period will reduce to six months.

The Government has confirmed that employees who already have six months’ continuous employment when the new rules take effect will come within the new protection.

You can read the Government’s latest guidance on the Employment Rights Act changes for employers.

This is not a day-one unfair dismissal right

This is an important distinction.

Earlier proposals attracted significant attention because they involved making ordinary unfair dismissal a day-one employment right.

That is not the final position.

From January 2027, the qualifying period will instead be six months. Existing day-one protections relating to matters such as discrimination and certain automatically unfair dismissals remain separate.

For employers, this makes it important that managers work from the current rules rather than older headlines about the Employment Rights Act.

Why do the unfair dismissal changes matter for SMEs?

Six months can pass extremely quickly.

A business recruits somebody.

They spend the first few weeks getting settled.

A manager notices a few concerns but decides to give the employee more time.

The probation meeting is postponed.

Another couple of months pass.

Nothing is properly documented.

By the time the business decides that the role is not working out, the employee may already have reached the new unfair dismissal qualifying period.

That is why SMEs should start reviewing their employment processes before January 2027.

The Government is already advising employers to prepare now.

Probation periods will become much more important

For many businesses, a three- or six-month probation period is already standard.

The new unfair dismissal rules make it even more important that probation periods are actively managed.

A probation end date should not simply pass without a conversation.

Managers should consider:

·      whether the employee is meeting the required standard;

·      whether expectations have been clearly explained;

·      whether performance concerns have been raised;

·      whether appropriate support has been provided;

·      whether attendance or conduct issues need addressing; and

·      what the appropriate outcome of the probation period should be.

Where there are concerns, these should be addressed promptly rather than allowed to drift.

Performance issues should be dealt with early

One of the biggest risks for SMEs is avoiding difficult conversations.

If somebody isn’t performing, managers can sometimes hope that things will improve on their own.

That can lead to problems being discussed informally but never properly recorded.

Under the new six-month qualifying period, businesses will have less time before ordinary unfair dismissal rights may become relevant.

A structured performance management process can help managers set expectations, carry out reviews and keep a clearer record of employee performance.

WorkSmarter’s performance management tools are designed to help businesses schedule and document employee reviews consistently.

Six things employers should review now

1. Check employee start dates

Review employees who joined during 2026.

Employers should identify who will have six months’ continuous service around 1 January 2027 and make sure any outstanding probation or performance matters are being managed properly.

2. Review your probation process

Make sure probation reviews actually happen.

Set clear review dates, give managers reminders and record the outcome of each review.

3. Deal with performance concerns promptly

Where somebody is struggling, explain the concern clearly and give appropriate support.

Do not leave important performance issues unresolved for months.

4. Train managers

Managers should understand when an employment issue needs to be documented and when HR advice should be sought.

Dismissal decisions should never be based solely on a quick conversation or an undocumented history of concerns.

5. Keep accurate employee records

Good documentation is increasingly important.

WorkSmarter’s Employee Record Page brings job details, employment terms and employee information together within a central digital HR record.

Supporting employment documentation can also be stored securely using WorkSmarter Digital HR Files.

That means key records are easier to retrieve if an employment decision is questioned months later.

6. Review your dismissal procedures

Managers should understand the appropriate process before dismissing an employee.

Even where somebody has less than six months’ service, employers still need to consider other legal risks, including discrimination and automatically unfair dismissal.

If in doubt, get HR advice before taking action.

Written reasons for dismissal are changing too

The Employment Rights Act also reduces the qualifying period for an employee’s statutory right to request written reasons for dismissal from two years to six months from 1 January 2027.

That makes clear record keeping particularly important.

If a former employee asks why they were dismissed, the business should be able to explain the reason clearly and consistently.

The financial risk is also changing

Another important change takes effect at the same time.

From 1 January 2027, the existing statutory cap on the compensatory award for unfair dismissal will also be removed.

That does not mean every successful unfair dismissal claim will result in an unlimited award.

Employment Tribunals will still assess compensation according to the applicable legal framework and the losses involved.

However, the removal of the statutory cap increases the potential exposure in some cases and provides another reason for employers to strengthen HR processes before the new rules arrive.

Could you explain an employment decision six months later?

This is a useful test for every SME.

Think about employees currently within their first year of employment.

Could your business clearly show:

·      when they started;

·      what their probation terms were;

·      whether a probation review took place;

·      what performance expectations were set;

·      what concerns were raised;

·      what support was provided;

·      what meetings took place; and

·      why any final employment decision was made?

If those answers currently sit across emails, notebooks, spreadsheets and managers’ memories, now is a good time to improve your processes.

How WorkSmarter can help

WorkSmarter is designed to help SMEs manage employee information and everyday HR processes from one place.

Our Digital HR Files help businesses keep employee documents securely organised, while the Employee Record Page gives managers a central location for key employment information.

WorkSmarter also includes performance management tools that can help businesses carry out and record employee reviews more consistently.

WorkSmarter Shield provides additional practical HR support when managers are dealing with difficult performance, conduct or dismissal situations.

Don’t wait until January 2027

The unfair dismissal changes in 2027 represent a major shift for UK employers.

The qualifying period is falling from two years to six months, the qualifying period for requesting written dismissal reasons is also reducing, and the statutory cap on compensatory awards is being removed.

For SMEs, the practical response is straightforward:

Manage probation properly. Address performance concerns early. Train managers. Keep good HR records. And get support before making difficult employment decisions.

Preparing now will put your business in a much stronger position when the new rules take effect.

This legal update is for general information and educational purposes only and should not be treated as legal advice. Employers should obtain appropriate HR or legal advice before making decisions relating to an individual employee or dismissal.