Probationary periods and unfair dismissal reform under the Employment Rights Act – your questions answered
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In our recent webinar on unfair dismissal reform under the Employment Rights Act 2025 (ERA), we received a number of follow-up questions on the effective management of probationary periods and the use of fixed term contracts. Over the next two articles, we will address those questions (along with a few of our own).
In this first article, we consider how organisations can use probationary periods to help mitigate the increased risk of unfair dismissal under the new regime.
Unfair dismissal: a brief recap
At present, employees need two years’ qualifying service to bring a claim for ordinary unfair dismissal. Compensation for unfair dismissal is currently capped at the lower of one year's salary or £123,543.
In practice, this means employers can assess employees over a relatively lengthy period and, if necessary, dismiss before the two-year point without risk of a claim for ordinary unfair dismissal.
What is changing and when?
From 1 January 2027, this position is set to change. The qualifying period for unfair dismissal will be reduced to six months and the cap on compensation will be removed.
What does this mean for probationary periods?
In light of the upcoming changes, employers should consider how probationary periods can be used more effectively as part of their approach to managing unfair dismissal risk.
The current two-year qualifying period has, in some cases, led to probationary periods being used as an extended trial period or at times a tick-box exercise. That luxury of time has now gone. The reduction in qualifying period means those first six months will become the only window in which to test capability and suitability, and if necessary, make dismissal decisions without ordinary unfair dismissal rights applying.
As a result, probationary periods are likely to take on greater importance. Employers will need to treat them as structured, actively managed assessment periods, with a clear focus on evaluating performance, addressing concerns early, and reducing risk.
What length should probationary periods be under the new regime?
Probationary periods of six months are currently common (especially for more junior employees). However, under the new regime, this is likely to be too long.
Under the new six-month qualifying period, a six-month probationary period will not leave room for delays caused by absence or holidays, nor does it provide time to extend the period to assess improvement where performance concerns arise.
Organisations may wish to consider implementing a shorter probationary period of around three to four months, with a contractual entitlement to extend. This has the benefit of focusing managers' minds on performance in sufficient time before unfair dismissal rights apply.
Should probationary periods be used for all roles?
Organisations should consider using probationary periods for all roles where possible, including for short-term contracts and senior individuals.
For senior executives, this is likely to represent a shift from current practice, where probationary periods are often seen as inappropriate. However, with unfair dismissal rights crystallising earlier, combined with the increased financial exposure due to the removal of the compensation cap, employers may need to revisit this approach, and expectations may need to shift accordingly.
What processes should employers have in place during probation?
Having clear, well-structured processes that are easy for managers to follow will be critical to the effective management of probationary periods.
Employees should be provided with clear details about what is expected of them during their probationary period as part of the onboarding or induction process. Consider job descriptions carefully as these will be key to employers being able to successfully point to areas of underperformance compared to the requirements in the job description.
Importantly, employers will not generally be required to follow a full formal performance or capability process during a probationary period, given that ordinary unfair dismissal rights will not yet apply. However, in practice, it will often be sensible to adopt a more proportionate or 'light touch' process. Providing clear feedback, giving the employee a reasonable opportunity to improve, and documenting the reasons for concern can help manage expectations and assist in demonstrating that any decision to dismiss was based on a considered and reasonable assessment. This can reduce the risk of challenge on other grounds, for example, discrimination or whistleblowing.
Managers should hold regular review meetings with employees, keeping clear notes of each meeting and sticking to agreed dates. Any performance concerns should be addressed at an early opportunity and clearly documented for evidential purposes.
It is particularly important that the end of the probationary period is diarised and that the employer confirms to the employee in writing in advance whether the employee has passed, or whether there is an extension to the probationary period and why.
In some cases, employers may wish to give an employee the benefit of the doubt, for example, where there is clear potential but some residual concerns, or where there has been insufficient time to fully assess performance (particularly in more senior roles). In these circumstances, it may be appropriate to adopt a 'pass with reservations' approach, or even adopt an extended probationary period from the outset, even if this means accepting that unfair dismissal protection may arise. Where this approach is taken, it will be important to continue to monitor performance closely and build a clear evidence base, to help support and justify a fair capability process should concerns persist.
What approach should be taken to notice during probation?
Employers should ensure that contracts of employment include clear notice provisions during probationary periods. It is common to provide for a shorter notice period during probation, with a longer notice period applying thereafter. Contracts should also include the contractual right to terminate employment by making a payment in lieu of notice (PILON). These provisions provide employers with greater flexibility and allow them to act quickly (and at lower cost) where concerns arise.
However, employers should bear in mind that, where an employee is dismissed without working their notice, or without working it in full (including where a PILON is made), the law operates to add statutory minimum notice (one week for employees with between one month's and two years’ service) onto the termination date to create a later 'notional' effective date of termination.
This is likely to be significant in the context of the reduced qualifying service. If not factored in, the addition of statutory notice could inadvertently take an employee over the six-month threshold for unfair dismissal protection. Employers should therefore plan dismissals carefully and allow a buffer to avoid unintentionally triggering unfair dismissal rights.
How important is documentation and record-keeping?
Maintaining a clear paper trail will be essential.
Even if an employee does not have unfair dismissal rights, a dismissal during a probationary period will not necessarily be risk free (as discussed below). There is also a risk that an employee may inadvertently gain unfair dismissal protection, for example, due to timing issues or slippage.
In those circumstances, employers will want to be able to rely on contemporaneous evidence to show that a decision to dismiss was based on a fair and reasonable assessment, and that the individual was given clear feedback and (ideally) the chance to improve on more than one occasion. Evidence of training and support will also be relevant.
This is particularly important given current Employment Tribunal delays. In some regions, hearings are now being listed several years after dismissal, meaning that documentation may prove critical where individuals have left an organisation or memories have faded.
What training is needed for managers?
Managers will play a critical role in managing probationary periods, ensuring that concerns are identified early, decisions taken promptly and helping to reduce unfair dismissal risk. It is therefore important that they are appropriately trained and equipped with the skills and confidence to manage performance conversations and processes effectively during this period (including with senior employees).
Training should focus on:
- How to run probationary reviews effectively.
- When and how to address performance concerns.
- The importance of acting early.
It is also important that managers understand the reason why the approach to probationary periods is changing, including the increased risk and value of unfair dismissal claims. Without this understanding, there is a risk that probationary processes are not used effectively, which could lead to avoidable claims.
What other risks should employers bear in mind?
While employees with under six months' service will not be protected from ordinary unfair dismissal, there remain a number of risks for employers to bear in mind. In particular, claims for discrimination, whistleblowing, breach of contract, and automatically unfair dismissal (for example, dismissal for a reason connected to pregnancy or asserting a statutory right), do not require any qualifying service.
One of the areas where this is likely to be particularly relevant in light of the unfair dismissal reforms is the duty to make reasonable adjustments for disabled employees. The shortened qualifying period means there will be less time to identify, implement and assess the impact of any adjustments.
Employers should therefore act quickly to identify potential disabilities and put appropriate adjustments in place at an early stage, to give employees the best possible opportunity to succeed during probation. In some cases, this may require a more cautious approach, including considering a probationary extension beyond six months (accepting that unfair dismissal protection may arise) where additional time is needed to properly assess the impact of adjustments and reduce the risk of a disability discrimination claim.
More broadly, employers should be mindful that decisions taken early in employment may come under scrutiny on other grounds. In practice, this means ensuring that decisions are properly documented, based on evidence, applied consistently across comparable cases and not influenced (or capable of being perceived as influenced) by a protected characteristic or protected disclosure.
Key takeaways
The reduction in the unfair dismissal qualifying period, combined with the removal of the compensation cap, represent one of the most significant shifts in unfair dismissal law in recent years. Once the reforms come into effect in January 2027, the consequences of getting things wrong will be substantially greater.
Getting probation right will be one of the most important ways for employers to manage and mitigate unfair dismissal risk under the new regime.
For more on the changes to unfair dismissal, see our previous article, 'Removal of the unfair dismissal compensation cap: employer risks'. For an overview of the wider changes under the ERA, please see our insights page: Employment Rights Act 2025 - what it means for employers.
Many thanks to trainee Alex Evans for his help in writing this article.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, June 2026
