How is the law on unfair dismissal changing under the Employment Rights Act 2025?

Insight

15.09.2025

Updated as of 18 December 2025

One of the headline reforms in the Government's landmark Employment Rights Act 2025 (ERA 2025) is the overhaul of protection from ‘ordinary’ unfair dismissal. Original proposals for day-one protection have been watered down, with the Government now confirming it will introduce a six-month qualifying period in place of the existing two years.

This blog sets out what we know so far and explores the potential implications for employers.

For more information about the ERA 2025 more broadly, see our overview of the Act and what it means for employers.

The current unfair dismissal framework

Currently, employees must have two years’ continuous service to bring a claim for ordinary unfair dismissal.

To lawfully dismiss an employee with unfair dismissal protection, employers must identify a potentially fair reason for dismissal – such as conduct, capability, redundancy, statutory illegality, or some other substantial reason – and follow a fair procedure. They must also be able to demonstrate that they acted reasonably in treating the chosen reason as sufficient to justify dismissal.

This is distinct from certain ‘automatic’ unfair dismissal claims, which do not require any qualifying period of service. These include (among others) dismissals connected to pregnancy and maternity, making a whistleblowing disclosure or exercising trade union rights.

Key changes under the ERA 2025

1. Protection from unfair dismissal from six months

The ERA 2025 removes the current two-year qualifying period for ordinary unfair dismissal claims, granting employees protection from unfair dismissal after six months' employment.

2. Restriction on future change

Currently, changes to the unfair dismissal qualifying period can be brought in with secondary legislation (ie via regulations), which requires far less parliamentary scrutiny than primary legislation (ie an Act of Parliament).
To further strengthen unfair dismissal protection, the Government has committed to ensuring that the unfair dismissal qualifying period can only be varied by primary legislation.
This means that any future change will require a full legislative process, including detailed debate and approval by both Houses of Parliament. This makes it much harder for future governments to alter the qualifying period quickly or without significant oversight by Parliament.

3. Increase in unfair dismissal compensation

Currently, the compensatory award for unfair dismissal is capped at 12 months' gross salary or an amount set annually by the Government (currently £118,223), whichever is lower.
The ERA 2025 2025 removes the compensation cap on unfair dismissal claims in its entirety.
This amendment was originally resisted by the House of Lords, but was passed following a Government promise that it would publish an impact assessment on the change.
This is likely to have a significant impact on employment practices, particularly on how departures of senior or highly paid executives are managed and the negotiation of subsequent settlements.

4. Tribunal time limits to be extended

As well as extending protection from unfair dismissal, the ERA 2025 also proposes longer time limits in which to bring unfair dismissal (and other employment-related) claims. It is expected this change will be introduced in October 2026.
Currently, dismissed employees must bring their claim within three months of the effective date of termination. The ERA 2025 will extend that to six months from the effective date of termination.

5. Probationary periods

The move to a six-month qualifying period means that proposals to introduce a statutory probationary period (or 'initial period of employment') are now unlikely to happen.
Employers will still be able to set contractual probationary periods of any length. This is likely to be advisable to ensure performance is properly managed before unfair dismissal protection takes effect at six months. It will also allow employers to set a shorter notice period at the start of someone's employment or provide access to different benefits during that time.

Implications for employers

At present, in the absence of discrimination or whistleblowing concerns, employers have become accustomed to being able to dismiss employees in their first two years of service with minimal risk, even where little or no procedure is followed.

Notwithstanding this, unfair dismissal is already one of the most common claims brought by employees: between January 2025 and March 2025, 23% of claims disposed of in the Employment Tribunal were for unfair dismissal.

Although the move to a six-month qualifying period will be easier for employers to manage than day-one protection, the reforms are still likely to have a significant impact on employers' day-to-day operations and increase the need for employers to manage performance effectively before employees gain unfair dismissal protection. While unfair dismissal reforms are not anticipated to come into effect until 2027 (see here for information about the timeframe for implementation), there are already things which employers can consider when preparing for the change:

Recruitment and onboarding

Enhance pre-employment screening and onboarding programmes to strengthen recruitment processes and reduce the risk of hiring someone unsuitable.

Probationary periods

Review internal probation procedures to ensure that they align with a six-month qualifying period. In particular, where probationary periods of six months' duration are already in use, employers should consider whether extensions beyond this point are advisable to allow sufficient time for performance management before statutory protection applies.
Ensure managers are trained to assess performance and conduct fairly and consistently before employees gain unfair dismissal protection.

Performance management

Manage performance proactively from day one: introduce or strengthen systems for setting goals, giving feedback, and documenting concerns.
Set clear performance expectations from the start.
Put in place robust systems for highlighting key dates
Ensure meetings happen to assess performance and decisions are made before unfair dismissal protection starts.
Gather and record evidence, since this will still be key to defending claims.
Review grievance and appeal procedures to address issues early in order to reduce the risk of litigation.

Dismissal process

Review and in due course amend policies and procedures to ensure dismissal procedures reflect the change in unfair dismissal protection.
Take care when giving notice. There is a mechanism in UK law which provides that, if you dismiss an employee without giving the proper statutory notice, the law adds that notice period to their length of service (other than in cases of gross misconduct). This extends their effective date of termination and could push them over the new six month qualifying period. For example, an employee dismissed without notice at 5 months and 28 days, would be treated as having over six months' service. To avoid this, it is advisable to include a payment in lieu of notice clause (PILON) in contracts, which would allow for immediate termination.