Employment law changes in 2027: is your business prepared?
Hailed as one of the most significant updates to employee rights in a generation, the Employment Rights Act 2025 (ERA 2025) set out to reframe many employers’ duties, with some of the most important taking effect from 1 January 2027.
For employers, now is the time to ask whether your current processes are going to be good enough from January.
Unfair dismissal: six months becomes the key point
One of the headline changes introduced by ERA 2025 is that from 1 January 2027, the qualifying period for ordinary unfair dismissal will reduce from two years to six months.
Obviously, this does not mean that employees cannot be dismissed once they reach six months’ service, as employers will still be able to dismiss where there is a potentially fair reason and a fair process has been followed.
What changes is the point at which unfair dismissal risk becomes a factor.
If your business has historically relied on the two-year qualifying period when dealing with employees who are not working out, there will be much less room to do that from January.
It is also worth remembering that some protections, including those relating to discrimination, whistleblowing, and certain automatically unfair dismissals, already apply regardless of length of service.
Is it time to review probation periods?
The changes do not mean that every business needs to move automatically to a six-month probation period. The more important issue is whether probation is being used properly.
Managers should be setting clear expectations, raising concerns when they arise, and keeping appropriate records. If an employee is struggling, they should know what the problem is and be given appropriate support with an opportunity to improve.
If the first serious conversation about performance happens a few days before a probation period ends, that is likely to become a much riskier approach.
As ever, an active management process and making accurate notes provide a solid foundation for any employment relationships, but now is a good time to check whether probation reviews actually happen when they are supposed to and whether managers know what to do when concerns arise.
The potential cost of getting dismissal wrong is also changing
From 1 January 2027, the statutory cap on compensatory awards for unfair dismissal will also be removed.
That does not mean every successful claim will result in unlimited compensation. Tribunals will still assess an employee’s actual loss and the circumstances of the case.
But for some employees, particularly senior or highly paid individuals, the potential financial exposure may be greater.
Taken together with the shorter qualifying period, that makes fair processes, good records, and properly trained managers more important.
Employees now have longer to bring many tribunal claims
From 1 October 2026, the time limit for bringing most employment tribunal claims increased from three months minus one day to six months minus one day for matters arising from that date.
That means disputes can remain live for longer, so businesses should think carefully about how long relevant employment records are retained.
Notes from meetings, emails, performance records, and documents relating to grievances or disciplinary decisions may become important months after an event has taken place.
Harassment duties have also become stronger
From 30 October 2026, employers have a stronger duty to take all reasonable steps to prevent sexual harassment at work.
That includes thinking about risks involving third parties such as customers, clients, and contractors, not just behaviour between colleagues.
The Equality and Human Rights Commission recommends a proactive approach, including risk assessments, appropriate policies and training.
Simply having a policy in place is unlikely to be enough if the business cannot show that it has considered where the actual risks lie, and so accurate record keeping becomes essential.
Improved Day-One Rights
ERA 2025 has also sought to improve the number of employee rights that are available from day one of their employment, i.e. removing the need for a qualifying period at all, namely:
Statutory Sick Pay (SSP) is now a day-one right for all employees, and is to be paid from the first date of absence, effective 1st April 2026;
Parental & Paternity Leave have both lost the initial qualifying period of services so that these are now also day-one rights, also effective 1st April 2026;
Bereavement Leave will also become a day-one right from 1st April 2027, with at least one week of leave being introduced under certain circumstances.
What should businesses be doing now?
Before January, we would suggest looking at five things:
- Review probation arrangements. Are review points happening early enough and are concerns being dealt with properly?
- Look at how managers handle performance and conduct issues. Problems should be addressed as they arise, not left until the end of probation.
- Check contracts and employment policies. Identify what may need updating as the new rules come into force.
- Review harassment risks and training. Think about customers, clients and contractors as well as employees.
- Brief your managers. The people making day-to-day employment decisions need to understand what is changing.
There are further employment law changes due during 2027, including reforms around fire and rehire, bereavement leave and flexible working.
Employers do not need to overhaul everything overnight. But the reduction in the unfair dismissal qualifying period is a significant change, and January is not far away.
If your existing probation and performance processes have not been looked at for a while, now is a sensible time to do it.
If you would like to discuss how any of these changes could affect your business, or need support with an employment matter, please contact the IHLS team.