What Does the Statutory Cap on Unfair Dismissal Mean for Me?

Clients are already asking, “If the unfair dismissal qualifying period drops to six months, do we need to shorten our probation periods?”

The short answer is, not necessarily. But you do need to rethink what happens in those first six months.

What’s actually changing?

Under the Employment Rights Act 2025, the qualifying period for “ordinary” unfair dismissal will reduce from two years to six months, with effect from 1st January 2027. From that point:

• Any employee with six months’ service will be able to bring a claim for ordinary unfair dismissal.

• The qualifying period for the right to written reasons for dismissal also drops to six months.

• The qualifying period is removed for unfair dismissal claims relating to spent convictions.

• The cap on compensatory awards for unfair dismissal is removed, so tribunals are no longer limited to the lower of 52 weeks’ pay or the previous statutory maximum.

Day‑one protections (discrimination, whistleblowing, health and safety, asserting statutory rights) stay as they are.

The intention is that, from 1st January 2027, employees who already have six months’ service will gain protection immediately; everyone else will gain it as soon as they hit six months.

Do you need to shorten probation periods?

There is no legal requirement to change your probation lengths. You can still have three, six, nine or twelve‑month probation periods. The law doesn’t set a maximum.

What changes in the risk profile?

Once someone reaches six months’ service, they gain unfair dismissal protection, even if their contract says they are still “on probation”.

So a twelve‑month probation no longer gives you twelve months of “low risk”. It gives you roughly six months of lower risk, and then six months where the “probation” label is mostly internal language, legally, you’re into standard unfair dismissal territory.

In practice, many employers are likely to move towards:

• Making six months the default probation length for most roles.

• Treating months five or six as the real decision point about whether someone is a long‑term fit.

Longer probation periods can still have value (for example, staged objectives, closer supervision, delaying access to certain benefits), but they won’t shield you from unfair dismissal claims once an employee passes six months’ service.

What does this mean for your HR practices?

Think of it less as “Do we shorten probation?” and more as “How do we front-load our assessment and support?”

Use the first six months properly

Those first six months become critical. It is worth:

• Being clearer at offer and induction stage about what success looks like in the first three to six months.

• Building in structured check‑ins (for example, weeks 4, 8, 12, and a proper review around month 5).

• Having honest conversations early and, where it’s clearly not working out, being prepared to act before the six‑month mark.

Treat the six‑month point as your last “low‑risk” exit

If you keep a six‑month probation, that final review is now your last relatively low‑risk opportunity to end employment for performance or fit.

That means:

• Holding the review on time, not quietly letting it drift.

• Making a clear decision to confirm, extend (if your contract allows) or end employment.

• Ensuring you have a basic, fair process, even then, a meeting, feedback, and a chance for the employee to respond, so that your decision is still reasonable.

Recognise the cost of getting it wrong

Removing the compensation cap means that, in principle, compensation can reflect the employee’s full financial loss, rather than being capped at a statutory maximum. Most awards will still be modest in practice, but the potential upside for a claimant is higher.

That makes it more important to:

• Ensure you have a clear, lawful reason for dismissal.

• Follow a reasonable process, even for employees with between six and twelve months’ service.

• Train managers who recruit and manage probationers so they understand the new timelines and risks.

What should you be doing now, and how can we help?

If you’re planning for 2027, this is not about you quietly rewriting policies on your own. It’s about making sure you have the right structure in place and that your managers actually use it in practice. That’s where our HR support really adds value.

Here’s how this typically looks when working with clients:

Contract and probation review (done with you).

Rather than you trawling through contracts, we can review your current terms and probation clauses, flag where the six‑month qualifying period bites, and suggest updated wording that reflects the new risk point and your culture.

Agreeing on a sensible default probation length.

We can help you decide whether six months should become your standard, where longer or shorter periods still make sense (for example, senior or safety‑critical roles), and how to build in clear extension criteria rather than ad‑hoc decisions.

Designing a practical probation process.

Together, we can map out a simple, repeatable process for the first six months: induction milestones, check‑in points, review templates, and “red flag” triggers so borderline cases are picked up early instead of drifting.

Updating your “how to dismiss” playbook.

We can refresh your manager guidance so it’s crystal clear what a fair process looks like once someone hits six months’ service, including suggested wording, scripts for difficult conversations, and when to involve HR.

So, does the law change mean you must slash all your probation periods to six months? No. But it does mean that from six months onwards, any dismissal could be tested in a tribunal. The real question is whether your documents, your processes and your managers are ready for that shift, and that’s exactly what we can help you put in place.