Day One Unfair Dismissal: What UK Employers Need to Prepare For

From 1 January 2027, the unfair dismissal qualifying period in the UK drops from two years to six months. This is one of the biggest changes in the Employment Rights Act 2025 and it fundamentally changes how you manage underperforming staff.

You need to understand what is changing, what it actually means in practice, and what you need to do before January 2027 to protect your business.

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What Is Actually Changing?

At the moment, an employee needs two years of continuous service before they can bring an unfair dismissal claim at an employment tribunal. This two-year qualifying period has given employers significant flexibility to dismiss employees in their first two years without needing to follow a detailed fair dismissal process.

Under the Employment Rights Act 2025, this qualifying period is being cut to six months, effective for dismissals on or after 1 January 2027.

A note on terminology: this change is often referred to as "day one unfair dismissal rights" in the press, because the original Bill proposed removing the qualifying period entirely. The final Act reduced the qualifying period to six months, not zero. So it is not truly "day one" unfair dismissal, but it is still a major change from the current position.

Compensatory awards are also being uncapped. Currently, the compensatory element of an unfair dismissal award is capped at one year's pay (up to a maximum of £115,115 in 2025/26). That cap is being removed. Tribunal awards could increase substantially for senior employees.

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Who Does This Affect?

Any UK employer who hires staff.

If you are used to managing people out within their first two years without a formal process, that approach will need to change from January 2027. By that point, any employee you hired from July 2026 onwards will be within six months of having unfair dismissal protection.

The highest-risk scenarios:

• Employees who do not perform as expected during their first six months
• New hires who turn out to be a poor cultural fit
• Employees hired in roles that change or disappear quickly
• Trial hires where informal probation is used but not documented

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What Is "Unfair Dismissal"?

Unfair dismissal does not mean the employer had no reason to dismiss the employee. It means the reason was not one of the five potentially fair reasons, or the process used was unreasonable.

The five potentially fair reasons for dismissal:

1. Capability: The employee cannot do the job to the required standard
2. Conduct: Misconduct or gross misconduct
3. Redundancy: The role no longer exists
4. Statutory restriction: Continuing the employment would break a law (for example, losing the right to work)
5. Some other substantial reason (SOSR): A catch-all for genuine business reasons that do not fit elsewhere

Having a fair reason is not enough. You also need to follow a fair process. That means: warning the employee, giving them a chance to improve, conducting a proper investigation, holding a formal meeting, and allowing them to appeal.

Under the current two-year qualifying period, many employers skip this process for new starters. From January 2027, you cannot.

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The Probationary Period Question

With a six-month qualifying period, the design and management of your probationary period becomes your primary protection.

The critical point: a well-run probationary period, with documented reviews and clear performance expectations, gives you a legitimate basis for dismissal before or at the six-month mark. A poorly documented probation, or no probation at all, leaves you exposed.

The ERA 2025 does not define what a probationary period must look like. But the government has been clear that probationary dismissals should follow a "lighter touch" process compared to dismissals of established employees. ACAS guidance on probationary dismissals is expected in advance of the January 2027 changes.

A good probationary period, from January 2027, should:

• Be set at six months or less in the employment contract
• Include a formal review at months one, three, and six (or a shorter cycle)
• Document concerns in writing as they arise
• Give the employee clear written feedback on what needs to improve
• Include a formal warning before dismissal where performance is the issue
• Allow the employee to be accompanied at any formal meeting
• Offer a right to appeal any dismissal decision

Full guide: Probationary Periods After ERA 2025

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The Uncapping of Compensatory Awards

This matters particularly if you employ higher-paid staff. Currently, the maximum compensatory award in an unfair dismissal claim is capped at one year's pay or £115,115 (whichever is lower). From January 2027, this cap is removed.

For a senior employee on £80,000, the current maximum compensatory award is £80,000. From January 2027, if that employee is found to have been unfairly dismissed and cannot find comparable work quickly, the tribunal could award significantly more.

Practical implication: the financial stakes of getting a dismissal wrong have increased. This makes it more important to follow the right process, document your reasoning, and take advice before dismissing anyone.

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The "Day One" Rights That Already Exist

Before January 2027, there are already some rights that apply from day one of employment. These are not affected by the qualifying period change:

• Discrimination: Employees can bring discrimination claims at any time (no qualifying period)
• Whistleblowing: Protected disclosure dismissals can be challenged at any time
• Minimum wage: Applies from day one
• Working hours: Working Time Regulations apply from day one
• SSP: Now applies from day one (from 6 April 2026)
• Paternity and unpaid parental leave: Now a day one right (from 6 April 2026)

The change from January 2027 adds unfair dismissal to this list (with a six-month qualifying period), not as a true "day one" right but as an earlier right than before.

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What You Need to Do Before January 2027

Step 1: Update Your Probationary Period Clause

Review every employment contract template you use. If your probationary period is currently three months, consider extending it to six months. If it is already six months, check that it is actively managed and documented.

Key contract changes:

• Set probation at exactly six months (not three)
• Include a clear review process in the contract or your probation policy
• Add a right to extend probation in genuine cases (common but check this is valid in your specific situation)

Step 2: Build a Probation Management Process

Create a simple, repeatable process that managers follow for every new hire:

• Week 1: Induction signed off and documented
• Month 1: Written review meeting, action points noted
• Month 3: Written mid-probation review, clear targets set
• Month 5: Early warning review if performance concerns exist
• Month 6: Final probation review, pass or fail decision documented

Step 3: Train Your Managers

The two-year qualifying period has led many managers to assume they can simply let someone go informally if things do not work out. That assumption is wrong from January 2027 for anyone hired after July 2026.

Run a briefing for all line managers before the end of 2026. Key messages:

• Document performance concerns as they arise, not at the end
• Give written feedback in reviews
• If you are thinking of not passing someone's probation, speak to HR (or EmployerKit) before the decision is made
• Never make a dismissal decision without a formal meeting where the employee can respond

Step 4: Review Your Dismissal Process

Your disciplinary and dismissal procedure needs to be fit for purpose before January 2027. ACAS Code of Practice on Disciplinary and Grievance Procedures applies to dismissals. Tribunals apply a 25% uplift on awards where an employer unreasonably fails to follow the ACAS Code.

Full guide: How to Run a Fair Disciplinary Procedure

Step 5: Review Your Record-Keeping

From January 2027, tribunal time limits are also extending (to six months in most cases). You will need to retain dismissal-related records for longer.

Keep:

• Signed employment contracts with probation clauses
• All probation review records
• Any written performance concerns or warnings
• Notes from formal meetings (including the employee's responses)
• The dismissal letter and any appeal outcome

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What Happens If You Get It Wrong?

If an employee with six months' service is dismissed without a fair reason and a fair process, they can bring an unfair dismissal claim at an employment tribunal. From January 2027, the compensatory award is uncapped.

Tribunal awards for unfair dismissal typically include:

• Basic award: Based on age, length of service, and weekly pay (similar to statutory redundancy pay)
• Compensatory award: Based on financial loss suffered (wages, benefits, time to find new work). Uncapped from January 2027.

Average employer costs for defending an employment tribunal claim (win or lose) are around £8,500 in legal costs. Settlements to avoid tribunal commonly run from two to twelve months' salary.

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FAQ: Day One Unfair Dismissal

Is it really "day one" unfair dismissal?

No. The final Employment Rights Act 2025 reduced the qualifying period to six months, not zero. The term "day one" has been used loosely in media coverage of the original Bill. The actual change is: qualifying period cut from two years to six months, for dismissals from 1 January 2027.

When does the six-month qualifying period start applying?

For dismissals on or after 1 January 2027. If you dismiss someone on 31 December 2026, the current two-year qualifying period still applies. If you dismiss someone on 1 January 2027, the six-month period applies.

Can I still use a probationary period?

Yes. A probationary period is still a useful management tool and a legitimate mechanism for exiting underperforming employees. But from January 2027 you need to manage it properly. Document performance concerns, conduct formal reviews, give the employee a chance to respond, and follow a fair process before dismissing.

What if I extend a probationary period beyond six months?

You can contractually extend probation, but from January 2027, the employee will have unfair dismissal rights after six months of service regardless of whether their probation has ended. An extension does not reset the clock on their employment rights.

Do all employees get unfair dismissal rights from day one?

From day one, employees are protected against dismissal for discriminatory reasons, whistleblowing, trade union activities, and other automatically unfair reasons. The six-month qualifying period applies specifically to ordinary unfair dismissal claims.

Does the compensatory award cap removal affect all dismissals?

From January 2027, the compensatory award cap is removed for unfair dismissal claims. This applies regardless of salary level. The basic award (which is capped to weekly pay) is not affected.

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Get Your Contracts Checked

The six-month qualifying period change takes effect in January 2027. You have time to prepare, but the process changes you need to make (probation redesign, manager training, documentation systems) take time.

Get your contracts checked against the new rules. EmployerKit Audit from £49. Upload your employment contract and get a specific report on what needs updating before January 2027.

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Last updated: April 2026