The Employment Rights Act 2025 proposes to make big changes when it comes into force in 2027! See our previous article here.
We want to let you know about three changes that are effective from 1 January 2027 but that employers need to know about before July 2027:
- Unfair dismissal: the compensatory award cap (currently a year’s gross pay, maxing out at £123,543) gets removed.
- Unfair dismissal qualifying period: The service requirement to qualify for unfair dismissal drops from two years to six months
- Fire and Rehire Protections: Ban on the practice of dismissing employees to rehire them on less favorable terms, except under highly limited financial circumstances (basically, impending insolvency).
What this means for employers right now is
- Any staff you hire from 1 July 2026 will be able to sue for unfair dismissal from 1 January 2027
- So if employers need to improve their recruitment practices, now is the time to do it
- Follow up on any conduct or performance concerns for new employees without delay in the second half of 2026
- If a new hire is underperforming in the second half of 2026, end probation or extend it – allowing the date to pass will suggest there were no performance problems, which makes it harder to dismiss in the new year
- If an employer wishes to make any changes to terms and conditions, it will be virtually impossible to do next year – only six months remain to take advice, consult, issue new contracts and apply pressure to employees who refuse to accept new terms
AImage used under CC courtesy of Dimitri Baranovskiy