Termination of employment is about to become a much more immediate and much more expensive risk for employers. From 1 January 2027, the unfair dismissal regime will change significantly.
For employers, three changes matter in particular:
The practical impact of this is that fairness of the dismissal process will become a materially more significant financial risk in its own right. At present, uncapped dismissal-related exposure is usually associated with discrimination, whistleblowing or other automatically unfair dismissal claims. Once these reforms take effect, ordinary unfair dismissal claims may also carry materially higher exposure where the employee has substantial ongoing loss.
Fair process should therefore not be treated as an HR formality: it will become a core risk control from the earliest days of the employment relationship.
Employers should be focusing now on:
There are two important timing points.
Firstly, although the law does not change until 1 January 2027, employees who start employment on or after 2 July 2026 may reach six months’ service on or after the date on which the new regime is expected to come into force. Consequently, in practical terms, employers are already moving into the transition period. Employees who, by 1 January 2027, have between six months’ and two years’ service will also acquire ordinary unfair dismissal protection earlier than employers had previously expected.
Secondly, employers should not assume that a dismissal taking place shortly before 1 January 2027 will necessarily fall outside the new regime. The effective date of termination can be affected by statutory and contractual notice, and that may bring some dismissals within the period in which the employee has the necessary qualifying service. In practice, employers will need to work backwards from the employee’s start date, the applicable notice period and the expected commencement date of the reforms before deciding whether ordinary unfair dismissal protection has been acquired. For some new starters, this may mean that decisions need to be made significantly earlier than employers might have expected, immediately before the Christmas period. That is unlikely to have been the intended practical consequence of the reforms, but it is a timing issue employers will need to manage carefully.
The time is therefore now for employers to ask whether their probation, performance and dismissal processes are robust enough.
This article forms part of our ‘Employment Rights Act 2025: guiding employers through change’ series. In our previous article, we explored the first phase of the reforms introduced in April 2026. This instalment has focused on the forthcoming changes to the unfair dismissal regime and the practical steps employers should be taking now.
Further reforms are expected through 2026 and into 2027, introducing additional obligations and increasing employment law risk for many organisations. This series will continue to examine those developments as further details become available, helping employers prepare for each phase of implementation.
For a practical summary of the key actions, download our ERA Employer Readiness Checklist (July 2026 Edition).
In April, the first wave of reforms was introduced. While the immediate impact may feel limited to some employers, responsibility and exposure have shifted in several critical areas. The direction of travel is clear – and further changes are coming throughout 2026 and 2027.
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