A number of changes are already in force, including day-one parental and paternity leave rights, statutory sick pay from the first day of absence with no lower earnings threshold, a doubled protective award for collective redundancy consultation failures, initial trade union reforms and the creation of the Fair Work Agency with wide-ranging enforcement powers.

Further changes will include doubling the time limit for bringing employment tribunal claims, requiring employers to take “all reasonable steps” to prevent sexual harassment and introducing a duty to prevent third-party harassment, alongside new trade union access rights and a duty to give workers written notice of their right to join a trade union.

Looking to 2027 and beyond the changes to unfair dismissal, reforms are also set to include significant restrictions on ‘fire and rehire’ practices, changes to the collective redundancy threshold (currently 20 or more employees at one establishment over 90 days), compulsory equality action plans, day-one right to bereavement leave, changes to flexible working request handling, enhanced protections for pregnant workers and changes to guaranteed hours, shift compensation and umbrella company regulation.

Of these reforms, the changes to unfair dismissal are likely to be among the most significant to both employers and employees. These changes will bring more employees within protection much earlier and increase the potential value of claims.

Currently, employees need two years’ continuous service before they can bring an ordinary unfair dismissal claim. There are exceptions, including dismissals connected with discrimination, whistleblowing, pregnancy and other automatically unfair reasons, which can already be pursued from day one. However, for conduct, capability, and redundancy dismissals, the two-year period has given employers time to assess suitability and performance.

From 1 January 2027, the qualifying period will reduce from two years to six months. Protection will apply immediately to employees who already have six months’ service on that date, which will include those who started on or before 1 July 2026, with any others protected once they reach six months.

The related right to request written reasons for dismissal will also align with the new six-month qualifying period. Employers will need to ensure that decisions are documented early, including the process followed and evidence relied on.

The practical impacts for employers will be significant, with them having less time to identify and address performance, conduct or cultural fit issues before unfair dismissal protection applies, meaning they will need to factor unfair dismissal risk into decisions much earlier.

The second major change is the removal of the cap on the compensatory award. At present, compensation for unfair dismissal is capped at the lower of 52 weeks’ gross pay or the statutory maximum, which is currently £123,543 for dismissals on or after 6 April 2026. From 1 January 2027, that cap will be removed. Tribunals will still assess actual financial loss, causation and mitigation when determining compensation, but without a fixed upper limit.

For many claims, awards may still fall below the current cap. However, the increased risk is significant for employers with higher-paid employees, as claims involving bonus, commission, pension loss, equity or long-term incentives will become more valuable and harder to assess.

Employers should also expect to see a shift in negotiating power. Without the current cap, employees may be more willing to pursue claims through the employment tribunal, particularly where they have significant losses or may struggle to find comparable work. This will likely increase settlement expectations.

Against that backdrop, employers should start preparing now in three main areas.
All recruitment should be robust, with clear role requirements and effective assessment of suitability. Job descriptions and selection criteria should also be clear and consistent, so that expectations are properly communicated from the outset.

Probationary periods should also be reviewed. Employers should reduce six-month probation periods so that key assessment points fall before unfair dismissal protection applies and, where appropriate, build in discretionary extensions to preserve flexibility. In any event, probation reviews should be meaningful and evidenced.

Disciplinary, capability and dismissal procedures should be consistent, fair and well documented. Once employment begins, managers should not wait until the end of probation to address concerns. Issues should be identified and discussed early, with conversations recorded accurately. Managers should also know when a formal process is needed and comply with the Acas Code of Practice.

These reforms will not prevent fair dismissals where justified. They will, however, make it more important to act early, evidence decisions carefully and approach dismissals with a clear understanding of the increased legal and financial risk.