Employment law in 2027: changes to unfair dismissal

January 2027 will bring a change to employment law that will potentially have the biggest impact of any update in recent years.

Under Section 25 of the Employment Rights Act 2025, the qualifying period for employees to make a claim of unfair dismissal will be reduced from two years to six months. This will be applicable for all employees who are dismissed on or after 1 January 2027.

Consequently, if performance issues emerge late in a six-month probation period, or if a dismissal procedure runs just one day past the six-month threshold, the employee will gain the legal right to raise an employment tribunal claim for wrongful termination.

When considering whether an employee has the required length of service to make such as claim, a tribunal will include the statutory notice period of one week, even if the employee does not work their notice. Taking this into account, any dismissal would need to be communicated to an employee one week before they reach six months service.

This is likely to place increased pressure on employers to make decisions on the suitability of a new employee in a much shorter time scale, or to ensure that there is a legally fair reason for the dismissal. Below, we will look at some of the potential issues we are expecting, with some suggested ways to avoid these problems in early years settings.

Reviewing your employment contracts is essential to negate any legal issues that may arise from this change. With employees able to claim unfair dismissal once they have reached six months of service, particular attention should be paid to the wording of the probationary period section.

If the employee’s probation period is six months, failing to amend the wording could mean the employer is tied in for the full length of this term. The wording should clarify that the probation period is “up to” six months. This will ensure that a decision can be made about the suitability of the employee during the probationary period and not only at the end, without risking breach of contract.

The contract should make clear that employment can be terminated at any point during the probationary period with the relevant notice (a minimum of one week after the first month of employment).

"This is likely to place increased pressure on employers to make decisions on the suitability of a new employee in a much shorter time scale."

All organisations are expected to have disciplinary procedures set out in the contract of employment, outlining the following:

• The employee will receive a series of warnings before dismissal is considered.
• A warning or dismissal decision will only be made after a formal hearing is held, with advance notice and the right to be accompanied given.
  
• The employee has the right to appeal against any decision made.
  

These disciplinary procedures are likely to cause the period of employment to go over six months and therefore expose the employer to the risk of an unfair dismissal claim. To allow for this, the contract should include a provision that these procedures do not form part of the terms and conditions, or that they are not contractual within the first six months of employment.

Perhaps the biggest potential issue with the upcoming employment law change stems from scheduling probation meetings in advance.

If underperforming employees are warned that their jobs are at risk, they have an incentive to delay the process. They could do this by calling in sick, which they are entitled to do for a week without the need for a medical certificate, until they have crossed the threshold for unfair dismissal protection.

This could be a difficult issue to deal with, as there is no one-size-fits-all answer. However, if you have updated your contract as outlined above and you have clear concerns regarding the employee's capability, you can call them into an informal meeting (as long as the employee’s right to be accompanied is not refused) and terminate their employment on the same day. To protect your setting, this should follow other informal meetings where the concerns are raised and where the opportunity is given to discuss any reasons for the conduct or performance issues. 

As well as the amendments to the employment law outlined about, the time limit for any claims to be submitted to an employment tribunal is also set to change from 1 October 2026. Most claims that currently have three-month time limit, such as unfair dismissal, discrimination and unlawful deduction from wages, are to increase to six months. Following these changes, an ex-employee may look to make an employment tribunal claim up to six months after they have been terminated.

You can access expert advice on the upcoming changes to employment law by calling Law-Call.

As an Alliance member, you have access to Law-Call's 24-hour legal advice telephone service. Details can be found in the Alliance member benefit overview section of EYA Central: bit.ly/U5Law-Call.

The Alliance is hosting an Employment Rights Act 2025 Connect session on Wednesday 30 September at 6.30-7.30pm, covering the upcoming employment law changes. Booking details will be shared soon.