For many employers, the first couple of years of employment have traditionally been seen as a relatively low-risk period for managing performance and making difficult decisions. But changes coming into effect through the Employment Rights Act in 2026 and 2027 mean that businesses will need to rethink how they recruit and manage employees, and they haven’t got long to prepare.
Under the Employment Rights Act 2025, the qualifying period for unfair dismissal is set to reduce from two years to six months. Crucially, the reform includes a retrospective element. This means that employees hired from July 2026 will gain the benefit of the shorter qualifying period when the provisions come into force in January 2027. In addition, the current compensatory award cap, which stands at around £118,000, will be removed.
Together, these changes can have significant implications for how employers manage probation and performance. The traditional assumption that the first year, or even the first two years, provides a relatively low-risk period no longer holds true. In practice, the six-month threshold will arrive far sooner than many line managers expect.
Why the retrospective element is important
The retrospective application could catch some employers and especially line managers off guard. It means that decisions taken about employees recruited in the second half of 2026 will need to withstand scrutiny under a six-month qualifying regime, even though the law will not formally change until January 2027.
 |
Get our essential weekday HR news and updates.
|
A new hire may complete probation in late 2026 with only limited documented feedback and no formal record of any concerns. If performance issues arise shortly afterwards, once unfair dismissal protection has taken effect, the employer may find it difficult to demonstrate that concerns were raised at the appropriate time and that a fair process was followed.
This is even more relevant for senior or higher-paid hires. With the compensatory award cap removed, unfair dismissal may become a more attractive route for claimants who would previously have framed complaints as discrimination or whistleblowing, where there is no cap. Tribunals could see an increase in higher value claims, and employers may need to apply formal procedures even where they might once have relied on a negotiated exit.
Common pitfalls in probation management
Tribunal cases frequently reveal similar themes when probation is poorly handled. One of the most common is the absence of clear, timely feedback. An employee may attend a final probation review and be told for the first time that their performance is unsatisfactory.
Concerns may have been raised informally, but without a clear warning that the issues could ultimately result in them not passing their probationary period.
Another recurring issue is consistency. Different managers apply different standards or might extend probation in an ad hoc way without setting measurable objectives. In some cases, there is no written record of meetings, no documented improvement plan and no evidence that support was offered.
Historically, employers may have felt that such shortcomings were unlikely to lead to an unfair dismissal claim within the first two years. That calculation changes under a six-month qualifying period. Which means the margin for error narrows considerably.
The central role of line managers
Many of the upcoming reforms, not only on unfair dismissal but also on statutory sick pay, harassment and whistleblowing, have a common thread. They require behavioural change from line managers and stronger management capability which should be addressed sooner rather than later.
Probation is often delegated almost entirely to line managers. Yet not all managers are confident in holding difficult conversations or giving negative feedback. Some may worry about demotivating new starters, while others simply lack training in performance management. The result can be vague assurances early on, followed by abrupt decisions at the end of the probation period.
From July 2026 onwards, that approach will carry greater legal risk. To reduce the likelihood of disputes and defend decisions if challenged, employers should address concerns at an early stage and make sure employees clearly understand what is expected of them, giving them a fair chance to improve before any final decision is taken.
Regular, structured check-ins with clear documentation should become the norm, and probation should be treated as an active process of assessment and support.
It’s important for HR also to review induction processes. Effective onboarding is more than an initial welcome session. It includes setting clear expectations, explaining standards of behaviour and performance, and ensuring that new hires know how and when they will be reviewed. Ultimately, a stronger induction framework reduces the likelihood of surprises at the six-month point.
Preparing for the changes
A sensible starting point is a policy audit. Probation, performance management and dismissal procedures should be reviewed to ensure they are watertight. In particular, HR should make sure that these processes are in place, everyone is made aware of them, and they are being implemented consistently on the ground.
Training is equally important. Line managers should receive practical guidance on conducting probation and performance reviews and documenting discussions in a way that reflects what has actually been said and agreed. This should include support on addressing underperformance at an early stage, rather than allowing concerns to surface only at the final meeting.
It is also important that employers review how they handle exits for senior hires. In many cases, these have historically been resolved through negotiation rather than a clearly documented process. If the compensatory award cap is removed, that approach may carry greater risk without a sound procedural foundation.
Overall, HR professionals should continue to monitor the phased implementation of the Act closely and adjust their processes as further detail becomes available.
A shift in mindset
The reduction of the unfair dismissal qualifying period represents a shift in expectations about fairness and accountability from the outset of employment. Employers that treat probation as a structured, supportive and well-documented process are likely to be well placed under the new rules.
Those who rely on informal conversations and last-minute decisions may find that the landscape has changed more quickly than anticipated.
As the focus on recruitment continues, it’s important not to overlook what happens next. In the coming years, how organisations manage the first six months of employment may prove just as important as how they attract talent in the first place.
Stephen is a principal editor who has worked on the Brightmine employment law and leading practice resources for over 20 years. After growing up in Northern Ireland in the 1980s, he trained as a solicitor in England in the 1990s but soon moved into legal publishing. He was among the first recruits to Brightmine in the year before it was launched as XpertHR in 2002.
Stephen has worked on a wide range of employment law and leading practice resources, including overseeing the creation and expansion of the HR templates resource types (Policies and procedures, Letters and forms, and Contract clauses). He has written up over 1,000 reports on employment law cases and created practical guidance on a range of HR issues for the Commentary & insights tool. He also had a stint working on Personnel Today.
