1 July 2026 marks six months until some of the biggest changes under the Employment Rights Act 2025 (“ERA”) come into force. Chief amongst these is the reduction in the period of employment required to bring an unfair dismissal claim from two years, down to six months.
A renaissance for probationary periods?
Whilst many employers have always included probationary periods in their employment contracts, usually running for between three and nine months, until now these probationary periods have been of low significance from a litigation risk perspective, as employers have had the flexibility to dismiss with limited or no process at any point up to two years, without fear of ordinary unfair dismissal claims.
However, with the reduction in the qualifying period to six months, employers will be incentivised to ensure they are using that time to properly assess new hires and support their integration into the business and, if it’s obviously not working out, make decisions on dismissal sooner rather than later.
Ironically the reduced qualifying period may arguably be a positive for employers in this regard, as under the current two year qualifying period, the lack of motivation to address performance from the outset has often led to underperforming employees remaining unmanaged and unsupported for a long period of time, with the obvious consequential impact on the business.
Equally, once the changes come into force, it’s unrealistic to think that employers will always be in a position to make decisions on whether an employee is a good fit for the role before the end of that six months and the overall risk profile is likely to increase. Knee-jerk dismissal decisions in such a short time frame will also prove costly for employers, in terms of the stability of the workforce and the recruitment costs of having to fill positions on such a quick turnover.
Therefore, fundamental to employers adapting to the new regime will be ensuring that they are both securing the best candidates and, importantly, ensuring that those new joiners are getting the training and support they need to demonstrate their worth from the outset.
What should employers be doing now to prepare?
Audit recruitment procedures - Check whether their recruitment processes are producing strong hiring decisions and to identify any risks that need to be addressed. For example: is there a consistent process for all new hires, or do managers depart from established process and bypass the usual steps; are job descriptions clear and realistic, in order to attract the right candidates; and are references checked consistently, and if gaps are identified, are they followed up?
Check employment contracts - Ensure probationary periods are shorter than six months, to allow for a short extension where required, or simply to leave time for dismissals to be effected before the six months, if probation is not passed. Employers will normally operate shorter notice during any probation, and this should continue regardless of period chosen, so as still to benefit from reduced contractual exposure should things not work out. It is also worth ensuring there is a contractual right to make a payment in lieu of notice (PILON) – this may be necessary to end employment quickly as the six-month window closes, keeping in mind that statutory minimum notice counts towards qualifying service for unfair dismissal purposes.
Consider use of probationary period for senior employees - Consider using probationary periods for senior executive and director-level contracts, where these may not have typically been used previously. Alongside the reduction in the qualifying period, the cap on unfair dismissal compensation is also being removed from 1 January 2027, meaning senior executive dismissals after the six month qualifying period may well become more expensive. Therefore, identifying inappropriate hires at senior level early on will be more important than ever.
Review how probationary periods are administered – Most importantly, ensure probationary periods are supported by well-structured and implemented policies and procedures, which make clear the training and support new recruits will receive, and how they will be assessed throughout their probation, so that informed decisions can be made at the end of the probationary period. Key to this will be ensuring managers are trained on these processes and take responsibility for ensuring that they are followed.
For further information on any of the issues in this legal update, or to find out about training managers on performance management and probation, please get in touch with your usual CMS employment team contact.
We will be discussing the ERA unfair dismissal changes, harassment and trade union rights of access in our ERA ready webinar on 17 September. Click here to register.
