Under the Employment Rights Act 2025, significant changes will be made to the law on unfair dismissal. Reforms will range from the extension of the time limit in which employees can bring employment tribunal claims to the reduction of qualifying service. These reforms are going to have a major impact on employers and the HR processes they have in place.
Background
Probation periods are a commonly used mechanism by employers to assess the suitability of new hires. During this time, employers evaluate employees’ skills, performance and compatibility with the organisation. Typically, probation periods range from three to six months, but the exact duration and terms are governed by the employment contract. Employers often adopt more flexible disciplinary procedures during probation to maintain discretion in managing performance or conduct issues. While employees can be dismissed more easily during this period, employers must still ensure that terminations are not based on unlawful grounds, such as discrimination or whistleblowing.
In this article, where I refer to probation periods, I am referring to an individual’s initial period of employment with an employer and not circumstances where an existing employee has moved into a new role within an organisation. In those circumstances, although there may be a trial period for them to settle into the role, if that trial is unsuccessful (depending on the employee’s length of service with the organisation), their employment should not be ended in the same way as an employee on a probation period. This is because it is likely that unfair dismissal protections would apply in that context and therefore a fair and reasonable process under the Employment Rights Act 1996 is required.
The current legal position
Under the law as it is currently, employees do not gain the right to claim ordinary unfair dismissal until they have completed two years of continuous service. This gives employers considerable flexibility in managing probation reviews and dismissals without the risk of an unfair dismissal claim. However, this will change significantly under the Employment Rights Act 2025 (ERA 2025).
What is changing under the ERA 2025
From 1 January 2027, the qualifying period for employees to claim ordinary unfair dismissal will reduce from two years to six months. This reduction will apply retrospectively, meaning any employee with six months of continuous service as of this date will gain unfair dismissal rights. This shift represents a major change in employment law and it will have significant implications on how employers manage probation periods and new hires.
Importantly, the new six-month qualifying period will apply only to ordinary unfair dismissal claims. Automatically unfair dismissal claims, such as those involving discrimination or whistleblowing, remain unaffected and do not require any qualifying service.
The ERA 2025 also extends the time limit for bringing an unfair dismissal tribunal claim from three months to six months, effective from October 2026, giving employees more time to lodge claims. This further increases the risks for employers who fail to follow fair procedures, as more time can pass between the incident and claim. During this time, records can be lost and recollections may diminish and key staff members might move on from the organisation.
The risk of an unfair dismissal claim is also increased by the removal of the compensation cap for unfair dismissal claims, effective from 1 January 2027. By removing this cap, the potential award in unfair dismissal claims is unlimited and employers could face paying increased awards.
Impact on probation periods
The reduction to the qualifying period for unfair dismissal will affect how employers manage probation periods. Currently, many employers set probation periods at six months. However, following the upcoming legal changes, this approach will become risky as employees will gain unfair dismissal protection immediately upon completing their probation. As a result, a dismissal for failing a probation period would need to meet the fair and reasonable requirements of the Employment Rights Act 1996, including a full and fair process leading up to the dismissal. For example, in the context of a conduct dismissal, this would involve a series of warnings given in accordance with the Acas Code of Practice on Disciplinary and Grievance Procedures.
The key risks to employers includes:
- delayed probation reviews: if a probation review meeting is delayed or a decision is not made promptly at the end of the probation period, the employee could pass the six-month threshold and gain unfair dismissal rights, making termination more challenging
- extensions of probation: employers often extend probation periods if an employee’s performance is borderline. However, under the changes to unfair dismissal, extending a six-month probation period would mean any dismissal would fall within unfair dismissal protection
- fair procedures: with the reduced qualifying period, any dismissal following probation will need to adhere to fair procedures, even if performance concerns arise during probation.
Practical steps for employers
To mitigate risks and prepare for these changes, employers can take proactive steps to review and adjust their practices surrounding probation periods and new hires.
Reduce probation period lengths
Employers should consider shortening probation periods to three, four, or five months. This provides a buffer period to extend probation if necessary or conduct final reviews before the employee reaches six months of service.
Conduct timely and thorough probation reviews
Regular review meetings during the probation period are essential and employers should not wait until the end of the probation to address performance or conduct issues. Identifying problems early allows for corrective action and ensures that decisions are made well before the six-month threshold.
Clear probation policies
Employers should ensure that probation policies are clearly outlined in employment contracts and handbooks. Policies should specify:
- the duration of the probation period
- the process for extending probation (if applicable)
- the criteria used to assess performance and suitability.
Document performance and decisions
Maintaining detailed records of probation review meetings, performance concerns and any actions taken is crucial. This documentation provides evidence of fair treatment and due process, which can be critical in defending against potential claims.
Train managers
Line managers should receive training on probation management and dismissal procedures. They must understand the importance of conducting timely reviews, providing constructive feedback and adhering to fair processes.
Review disciplinary policies
Employers should update disciplinary policies to ensure they do not inadvertently create risks for the organisation following the upcoming changes. While probation periods offer some flexibility, dismissals must still comply with contractual and statutory requirements.
Prioritise recruitment quality
With reduced flexibility for dismissing unsuitable hires, it becomes even more important to recruit the right candidates. Employers should refine their recruitment processes to ensure they are attracting and selecting employees who are likely to succeed in the role.
Note for employers
The changes introduced by the ERA 2025 mark a significant shift in employee rights, particularly regarding unfair dismissal. The reduction of the qualifying period to six months will increase risks for employers, making it crucial to revisit and tighten probation period practices.
Employers should take proactive steps to review the length of probation periods, conduct timely reviews and ensure fair and transparent procedures. With the right policies and training in place, businesses can mitigate risks and maintain a fair and compliant workplace.
If you need to chat about probation periods please contact Carrie for advice.
