Under the spotlight: Why July 2026 hires may require special attention
Probationary Periods
Under the new Employment Rights Act 2025, from 1 January 2027, employees will gain the right to bring ordinary unfair dismissal claims after obtaining six months’ service rather than two years.
This change could have significant implications for employers operating probationary periods of six months, particularly for employees that are being recruited in the July 2026 period.
An employee starting in July 2026, on a six-month probationary period, will reach the qualifying service to claim unfair dismissal as soon as the new rules come into force on 1 January 2027. As a result of this, dismissal decisions made at the end of probation may immediately carry the risk of there being a potential unfair dismissal claim.
Employers may therefore need to reconsider how they manage probationary periods, including:
Carrying out reviews earlier;
Documenting performance concerns more carefully;
Extending the probationary period before six months’ service is reached where appropriate; and
Ensuring managers follow fair procedures even during probation.
It is important to remember that probationary periods have never prevented employees from bringing certain claims such as:
Discrimination;
Whistleblowing detriment and dismissal claims;
Claims related to health and safety activities; and
Automatic Unfair Dismissal.
However, the reduction in the unfair dismissal qualifying period is likely to increase scrutiny of probationary period dismissals from 2027 onwards and broaden the circumstances in which ordinary unfair dismissal claims can arise during or immediately following probation. Therefore, waiting until the end of a six-month probationary period to assess the suitability will become increasing risky once six months’ service itself triggers unfair dismissal protection.
In addition to the reduction in the qualifying period, compensation for unfair dismissal claims is uncapped from January 2027, potentially increasing employers’ exposure to significant awards which will become potentially unlimited. Therefore, the financial consequences of getting an employee’s probationary period wrong can be catastrophic for a business. Taking advice from unfair dismissal solicitors at this stage can help businesses avoid that exposure.
Changes to Core Contractual Terms
The wider legislative landscape also points towards greater protection for employees. The Employment Rights Act 2025 introduces a new regime restricting an employer’s ability to change certain core contractual terms. This area of contractual variation employment law is among the most significant of the reforms. Where an employer dismisses an employee in order to impose a restricted contractual variation, the dismissal will be treated as automatically unfair unless the employer can bring itself within a limited exemption relating to serious financial difficulties.
Taken together these reforms signal a move away from the historically flexible approach many employers have adopted toward probationary periods and contractual changes. Business may therefore need to place greater emphasis on early performance management, robust procedures and careful workforce planning.
From a broad perspective:
These new restrictions are anticipated to come into force from 1 January 2027.
Dismissal used to impose a restricted variation will be treated as automatically unfair, unless the employer can bring itself within a limited exemption relating to serious financial difficulties.
Restricted variations relate to core contractual terms such as pay, pay calculations, working hours, pensions, certain shift schedules, time off / leave entitlements and clauses allowing those terms to be varied without the employee’s agreement.
Where “fire and rehire” is used to implement a non-restricted change (such as a change in location or job role), the dismissal will not be automatically unfair. Instead, it will be assessed under the ordinary rules governing unfair dismissal. This shift in fire and rehire law makes early planning essential.
The Statutory Code of Practice on Dismissal and Re-engagement is expected to be revised in 2026 to reflect the new legislation. Where the Code applies, an employment tribunal may increase any compensation awarded by up to 25% if it finds that an employer has unreasonably failed to comply with its requirements.
Notably, the Government has not yet issued regulations identifying the shifts that will be captured by the legislation, and future regulations may expand the scope of “restricted” commercial terms.
The Government is expected to publish these regulations and the new Code of Practice in late 2026 or early 2027. Employers may wish to update employment contracts before 1 January 2027 to avoid being caught by the anti-avoidance provisions, either by incorporating specific variation clauses or by restructuring benefits so that they are provided on a non-contractual or discretionary basis.
How we can help
Employers who are recruiting should begin reviewing probation procedures, contracts and manager training now to ensure they are prepared for the incoming changes.
Our employment law solicitors for employers at Orwins can assist businesses in preparing for these reforms by reviewing employment contracts, probation policies, and onboarding procedures to ensure they remain legally robust and commercially practical.
We can also provide tailored manager training, advise on handling probationary concerns and dismissals, and support businesses in implementing fair and compliant processes ahead of the anticipated changes.
Early legal input can help reduce the risk of disputes and ensure that organisations are well positioned for the latest changes under the Employment Rights Act 2025.
If have any enquiries or wish to speak with a member of our team, please contact us on 0161 832 2500, or email us at hello@orwins.law
Frequently Asked Questions
How does the Employment Rights Act 2025 change unfair dismissal rights?
From 1 January 2027, the qualifying period for ordinary unfair dismissal claims drops from two years to six months. Employees will be able to bring a claim once they reach six months’ service, which is a substantial shift from the position employers have planned around for years. Combined with the removal of the compensation cap from the same date, the practical effect is that dismissal decisions carry far greater risk and far greater potential cost than they do now.
When does the six-month unfair dismissal qualifying period take effect?
The new qualifying period takes effect on 1 January 2027. The timing matters for anyone recruiting in mid-2026. An employee who starts in July 2026 on a six-month probationary period will reach six months’ service as the new rules come into force, so a dismissal decision taken at the end of that probation could immediately attract unfair dismissal protection. We would encourage employers to factor this into recruitment and probation planning now rather than treating January 2027 as a distant date.
How should employers manage probationary periods from 2027?
The safest approach is to stop treating the end of a six-month probation as the natural point to assess suitability. We recommend reviewing performance earlier, documenting concerns carefully and consistently, extending probation before six months’ service is reached where that is appropriate, and ensuring managers follow a fair procedure throughout. Probationary periods have never prevented discrimination, whistleblowing or automatic unfair dismissal claims, so robust process has always mattered. From 2027 it will matter a great deal more.
What are the new rules on fire and rehire and contract variations?
The Act restricts an employer’s ability to change core contractual terms such as pay, working hours, pensions and leave entitlements. Where an employee is dismissed in order to force through a restricted variation, the dismissal will be automatically unfair unless the employer can rely on a narrow exemption relating to serious financial difficulties. Where fire and rehire is used for a non-restricted change, such as location or job role, the dismissal is assessed under the ordinary unfair dismissal rules instead. A revised Statutory Code of Practice is expected in 2026, and tribunals may increase compensation by up to 25% where an employer unreasonably fails to follow it. We can help you review contracts and variation clauses ahead of the changes.
