Unfair dismissal: qualifying period drops to 6 months in January 2027

From 1 January 2027, two of the most significant employment law changes in over a decade take effect: the qualifying period for ordinary unfair dismissal claims drops from two years to six months, and the cap on the compensatory award is abolished entirely.

The Employment Rights Act 2025 makes these the headline reforms of its January 2027 wave. The earlier proposal for day-one unfair dismissal protection was dropped after House of Lords amendments, but the six-month rule still represents an enormous shift in legal exposure.

What is changing

1. Qualifying period: 2 years → 6 months

• The qualifying period for ordinary unfair dismissal drops from two years' continuous service to six months.
• The protection applies to dismissals with an effective date of termination on or after 1 January 2027.
• Critical implication: employees with six months' service on 1 January 2027 gain protection immediately. That means anyone hired from approximately end of June 2026 onwards will have unfair dismissal protection from day one of January 2027 — well before they reach two years.

The qualifying period for the right to request written reasons for dismissal also drops from two years to six months, and the qualifying period for unfair dismissal in spent-convictions cases is removed entirely.

2. Compensation cap abolished

Currently, the compensatory award in an unfair dismissal claim is capped at the lower of £123,543 (uprated from £118,223 on 6 April 2026) or 52 weeks' gross pay. From 1 January 2027 both caps are removed entirely.

This aligns unfair dismissal with discrimination and whistleblowing claims, which have always had uncapped compensation. Tribunals can award whatever they consider just and equitable, with no statutory ceiling.

Day-one rights that have always applied

These remain unchanged — they applied before, and they still apply:

• Automatic unfair dismissal (whistleblowing, pregnancy, trade union membership, asserting a statutory right).
• Discrimination under the Equality Act 2010 (protected characteristics).
• Wrongful dismissal (failure to give contractual notice).

What employers must do before January 2027

1. Review all dismissal processes — documentation quality becomes critical when more employees can claim and there is no compensation ceiling.
2. Tighten probationary procedures. Probation periods of less than six months become more attractive; whatever the length, the process must be fair and well-documented.
3. Train managers rigorously on ACAS-compliant dismissal procedures. Most unfair dismissal claims succeed on procedural failings, not the underlying decision.
4. Update employment contracts with clear probation terms and performance expectations.
5. Review and refresh the disciplinary policy so it works for the new qualifying period.

This is the single most significant change in the ERA 2025 from an employer-risk perspective.

Official sources: GOV.UK — Unfair Dismissal Rights and ACAS — Unfair Dismissal.