How will the Employment Rights Act affect probationary periods?
From January 2027, employers will have significantly less time to decide whether a new employee is right for their role.
As part of a number of changes implemented by the Employment Rights Act 2025, the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months. At the same time, the statutory cap on compensatory awards for successful unfair dismissal claims will be removed.
For SMEs, this makes effective recruitment, onboarding and probation management more important than ever.
What is changing?
The new six-month qualifying period will apply to dismissals taking effect on or after 1st January 2027.
Employees who have already completed at least six months’ continuous service by that date will gain ordinary unfair dismissal protection immediately. This means the change will affect existing employees as well as new starters joining during 2026.
The removal of the compensatory award cap also increases the potential financial exposure for employers where an unfair dismissal claim succeeds. Compensation will, however, continue to be calculated using the employee’s evidenced actual and projected losses.
Together, these reforms mean employers should review their recruitment and probation processes now, rather than waiting until January 2027.
Does the Act change probationary periods?
The Act does not directly change probationary periods, they remain a contractual arrangement, and there is still no legal requirement to include a probation period or to set it at a particular length.
However, in practice the changes mean that employers will have a much shorter window in which to assess performance, conduct, attendance and overall suitability before ordinary unfair dismissal protection applies.
This means that probationary periods can no longer be treated as an administrative exercise or a meeting that is left until the end of month six.
Managers need to know:
what is expected from the employee;
how success will be measured;
when review meetings should take place;
how concerns should be raised and managed;
what support or training should be offered; and
what records need to be maintained.
A probation process should create clarity for both the employer and the employee. Expectations should be set from the start, progress should be discussed regularly, and the outcome of the final review should never come as a surprise.
Why waiting until month six could be too late
Employers should not wait until the end of a six-month probation period to carry out the first meaningful assessment.
Where there are concerns, managers need enough time to explain them, establish clear improvement expectations, provide appropriate support and assess whether progress has been made.
Notice periods must also be considered. The relevant date for unfair dismissal protection is generally the effective date on which employment terminates, not simply the date on which the employer makes the decision or gives notice.
As a result, giving notice shortly before the employee reaches six months’ service may not prevent them from qualifying for ordinary unfair dismissal protection. Review dates should therefore be planned around the employee’s notice period and the time needed to complete a fair process.
when review meetings should take place;
how concerns should be raised and managed;
what support or training should be offered; and
what records need to be maintained.
A probation process should create clarity for both the employer and the employee. Expectations should be set from the start, progress should be discussed regularly, and the outcome of the final review should never come as a surprise.
Why waiting until month six could be too late
Employers should not wait until the end of a six-month probation period to carry out the first meaningful assessment.
Where there are concerns, managers need enough time to explain them, establish clear improvement expectations, provide appropriate support and assess whether progress has been made.
Notice periods must also be considered. The relevant date for unfair dismissal protection is generally the effective date on which employment terminates, not simply the date on which the employer makes the decision or gives notice.
As a result, giving notice shortly before the employee reaches six months’ service may not prevent them from qualifying for ordinary unfair dismissal protection. Review dates should therefore be planned around the employee’s notice period and the time needed to complete a fair process.
Short service does not mean no risk
The qualifying period only applies to ordinary unfair dismissal claims.
Employees do not usually need a minimum length of service to bring a discrimination claims or most automatically unfair dismissal claims. Other potential claims, including wrongful dismissal and breach of contract, can also arise before the six month qualifying period.
Employers must therefore continue to make decisions fairly and consistently, even where an employee has less than six months’ service.
Particular care may be required where concerns relate to matters such as disability, pregnancy, family leave, whistleblowing, health and safety activities or the assertion of a statutory right.
Probationary periods should help employers make informed decisions, not provide a shortcut around a fair process.
How should employers prepare?
Before the reforms take effect, employers should:
review recruitment processes and introduce relevant practical or technical assessments to establish whether candidates have the skills, experience and behaviours required for the role;
work with recruiters who understand the business, its culture and the requirements of each role;
review employment contracts, onboarding documents and probation procedures ensuring they make expectations clear and give the employee the information, resources and support needed to succeed;
check that provisions covering notice, probation extensions and review arrangements remain appropriate;
set clear, measurable objectives at the beginning of employment;
introduce regular review meetings rather than relying solely on a final probation meeting;
use consistent templates to record objectives, feedback, concerns and support;
train managers to address issues promptly and hold effective probation conversations; and
involve HR before making a decision to extend probation or terminate employment.
These steps are not just about reducing legal risk. A well-managed probation process gives employees a clearer understanding of what good performance looks like and gives managers the confidence to address concerns before they become more difficult to resolve.
Smarter probation management with the FACT3 Hub
Consistent probation management can be difficult when managers are balancing competing priorities. Review dates are missed, conversations are delayed and important records can become fragmented.
That is why we have introduced a dedicated Probation Management feature within the FACT3 Hub, available to FACT3 People clients at no additional cost.
The feature gives managers a clearer, smarter way to manage probationary periods by providing:
automated milestone reminders;
practical guidance for managers;
structured review documentation; and
a consistent record of probation activity.
For standard six-month probation periods, the Hub schedules the final review at the end of month five, helping managers make a timely and informed decision before the probation end date. Review timings should still be considered alongside the employee’s notice period and the circumstances of the individual case.
The key takeaway
The Employment Rights Act makes managing probationary periods properly more important than ever.
From 1st January 2027, employers will have less time to assess new employees before ordinary unfair dismissal protection applies and potentially greater financial exposure where a dismissal is found to be unfair.
Businesses that set clear expectations, hold meaningful review meetings, address concerns early and maintain accurate records will be better placed to make fair, confident and timely decisions.
Now is the time to review your probation processes and make sure managers have the processes, tools and guidance they need.
To discuss how the reforms could affect your business, or to find out how the FACT3 Hub can simplify probation management, contact our People Team today.