The six-month qualifying period: what the 1 January 2027 unfair dismissal change means for the staff already on your payroll

Underneath that answer is a calculation he has probably never made consciously. He has two years. Twenty-four months in which, if it came to it, he could end the employment without that person being able to bring an ordinary unfair dismissal claim. It has been the quiet backstop for every employer in Great Britain since April 2012, and it has bought an enormous amount of time for a great many decisions that should have been made sooner.

That calculation stops working on 1 January 2027.

And here is the part that a surprising amount of the coverage aimed at business owners has got wrong. This is being drafted as a rule for new hires. It reaches the people already on your payroll, including the employee in the story above, who will be well past six months' service by the time January arrives.

What changes on 1 January 2027, and what does not

The Employment Rights Act 2025 cuts the qualifying period for ordinary unfair dismissal from two years to six months. That much is settled. The Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026 were made on 26 May this year and bring the relevant provisions into force on 1 January 2027. No further consultation is planned, and the Act strips out the power to vary the qualifying period by secondary legislation, so any future change would need a fresh Act of Parliament.

On the same day, the cap on the compensatory award for unfair dismissal disappears. At present, that award cannot exceed whichever is lower of £123,543 or fifty-two weeks' gross pay, which for most SME salaries means the real ceiling is a year's wages. From January, there is no more ceiling.

The government's own economic analysis puts the number of employees who gain the right to claim earlier than they can today at 6.3 million, close to a fifth of the workforce, and expects roughly 3,000 additional tribunal claims a year as a direct consequence.

Until then, nothing has moved. Any dismissal with an effective date of termination before 1 January 2027 remains subject to the two-year rule. The change applies in England, Scotland and Wales. Employment law is devolved in Northern Ireland, where the position is unchanged.

The part that is being widely misunderstood

The rule operates by reference to the effective date of termination, not the date somebody was hired. That single mechanical fact is the one most of the commentary has skipped past.

So on 1 January 2027, every employee who already has six months' service acquires the right to bring an ordinary unfair dismissal claim, on that day, with no transition and no phasing in. The group whose position actually changes is the one currently between six months and two years of service. Today, they have no ordinary unfair dismissal claim available to them. In January, they do.

Anyone who started with you on or before 1 July 2026 will already have been past six months by the time the change takes effect, which is why that date has appeared in some coverage as though it were a legal threshold. It is nothing of the kind. Nothing in the Act or in the regulations turns on it. It is simply what you get when you count six months back from January.

Which reframes the question an MD ought to be asking. Go through the payroll, find everyone with between six months and two years' service, and ask yourself this: if one of those relationships ended badly in February, would the way it has been managed hold up in front of a tribunal? For many businesses, the answer is uncomfortable, precisely because the two-year period has meant that nobody has needed to think about it.

Removing the cap does not mean unlimited claims

The cap removal has attracted more alarm than it warrants in some quarters and less than it warrants in others, so it is worth being precise about it.

Removing the ceiling does not mean tribunals will start awarding enormous sums. Compensation for unfair dismissal is still assessed on actual and projected financial loss, and it comes down to whether the employee failed to mitigate that loss or whether a fair process would probably have produced the same outcome anyway. Contributory conduct reduces it further. In 2023/24, the median unfair dismissal award was £6,746, and the mean was £13,749. Few claims get anywhere near the current cap, which is exactly why removing it changes little for the majority of cases.

Where it changes a great deal is at the top of the salary range. Take an operations director on £85,000 who is dismissed unfairly and takes fourteen months to find equivalent work. Today, the compensatory award cannot exceed fifty-two weeks' pay, whatever his actual loss turns out to be. From January, it can. The loss, he claims, runs as long as the loss actually runs.

That is the real shape of the risk, and it is concentrated on the senior, hard-to-replace people that an SME agonises over most.

Two things are unchanged and worth stating plainly. The basic award and statutory redundancy pay still run on the old formula, tied to age, length of service and a capped week's pay. And the day-one rights that already exist, discrimination among them, along with automatically unfair reasons such as whistleblowing, have never carried a qualifying period and have never been capped. If you have been treating the two-year rule as general protection, it was already thinner than you thought.

Your probation period is now the wrong length

Here is where it becomes practical.

Run a six-month probation, and from January, that probation ends on precisely the day the employee acquires the right to claim. You would have a probation review meeting and a qualifying employee arriving in the same week.

The window is shorter than six months in any case, for a reason almost nobody outside employment law is aware of. Section 97(2) of the Employment Rights Act 1996 provides that where an employer dismisses without giving the statutory minimum notice, the effective date of termination for the purposes of counting qualifying service is treated as the date on which that notice would have expired. For anyone with more than a month's service and less than two years, the statutory minimum notice is one week.

Follow that through. You decide at five months and three weeks that a probationer is not going to work out. You dismiss with immediate effect. The effective date of termination is deemed to be a week later, which puts it at six months, and they qualify. You have handed them the claim you were trying to avoid by a margin of days.

The exception is genuine gross misconduct, where an employer is entitled to dismiss summarily and is not caught by the extension. That is a narrow door, and businesses reach for it more often than the facts support, usually because they have not distinguished a performance problem from a conduct one.

So the decision has to be made and acted on well before month six. Three months, with a genuine extension available where there is a specific reason to use it, gives you far more room than four or five months ever will. There is a second reason for keeping the initial period this short, and it has nothing to do with tribunals. An extension is rarely read by the employee as neutral. It usually comes across as "we are still not sure about you", and stretching that uncertainty out for another month seldom improves the performance it was meant to address. It just prolongs the discomfort. Three months forces the earlier, cleaner decision that a longer default lets you keep avoiding. And the review points still need to be real, with written objectives set in the first fortnight and a written review around week six, ahead of the decision at week twelve.. That is ordinary performance management done early, which is exactly the discipline the two-year rule has allowed businesses to skip. The same is true of capability cases that have nothing to do with performance. A short-service employee who goes off with a long-term illness is now a very different proposition, because the legal position on ill-health capability moves faster than employers expect and from January, there is no two-year buffer behind it.

It also raises the cost of a poor hire, because the window in which a hiring mistake can be corrected cheaply has narrowed from 24 months to under 6. Which makes the quality of the hiring decision itself a commercial question rather than an administrative one.

One further point on probation, because coverage in 2024 and 2025 left a lasting misunderstanding. The original Bill proposed a statutory probationary period, an "initial period of employment" of around nine months, during which a lighter dismissal process would apply. That entire model was dropped in the House of Lords before the Act passed. There is no statutory probation period. Probation is a contractual arrangement with no special legal standing, and from January, it confers no protection whatsoever once six months have passed.

The December window, and the trap inside it

Between now and 31 December, the two-year rule still applies, and a number of businesses are quietly using the remaining months to resolve situations they have been avoiding.

But there is a trap inside that window, and it is the same mechanism again. Because section 97(2) pushes the effective date of termination forward to the end of the statutory notice period, a dismissal in late December that does not give notice can produce an effective date of termination in January. And an effective date of termination on or after 1 January 2027 brings the six-month qualifying period into play. Dismiss an employee with eighteen months' service on 28 December, without notice, and you can end up with a deemed termination date of 4 January and a claim that would not otherwise have existed.

Employment specialists reading the commencement regulations closely take the view that the removal of the compensation cap follows the actual termination date rather than the extended one, so a dismissal caught this way would bring the claim into scope without the uncapped award attached. That reading has not been tested in a tribunal, and I would not build a decision on it.

If you are going to use the months that remain, use them with notice given or paid in full, and on a process you would be content to put in front of a judge. Rushing a weak process to beat a deadline is how businesses generate the exact claim they were trying to outrun. And the deadline buys you less than it appears to, because discrimination and automatically unfair dismissal were never subject to a qualifying period in the first place.

What the two-year rule has quietly been doing for you

Strip away the legal detail, and something less comfortable comes into view.

For fourteen years, the two-year qualifying period has been substituting for management in a very large number of British businesses. It gave employers 24 months during which the cost of avoiding a difficult conversation was close to nil. A manager who could not set a clear expectation, or who let a poor hire drift through a year because the conversation was awkward, was covered by the calendar rather than by any competence of his own.

From January, the cover shrinks to six months. What remains is whether your managers can actually run a fair process, which makes this a question of management capability every bit as much as of employment law.

The businesses that come through it without much difficulty will be the ones where a manager already sets expectations in week one, has a straight conversation in week six when something is off, and writes both down. The ones who struggle will be those for whom the first written record of a performance concern is the dismissal letter.

What to change before January

1. Count the exposure. Run the payroll and list everyone with between six months and two years' service. That group changes its legal status on 1 January, and you cannot manage a risk you have not accounted for.

2. Shorten probation and make it mean something. Six months no longer works, and four or five still cuts it closer than it looks once notice periods are factored in. Three months, with an extension available for a specific reason rather than as a default, keeps the decision well clear of the six-month cliff edge and avoids the extension itself reading as a vote of no confidence. Written objectives in the first fortnight, written reviews after that.

3. Check what your contracts say about notice. If they let you dismiss during probation with immediate effect and no payment in lieu, that is where the effective date of termination trap catches you. Notice needs to be given or paid.

4. Train the managers who will actually have these conversations. The qualifying period has been doing this job for your line managers for years, and in January, it stops. A manager who has never had to document a performance concern in writing is about to need to. For businesses with no HR function, this is the point at which somebody has to own the process rather than the paperwork.

5. If you have a senior exit coming, the timing genuinely matters, and it matters more than it does for a junior one. A termination taking effect before 1 January 2027 falls under the old rules, cap included. Run it on a process that would stand up regardless. A discrimination claim carries no qualifying period and no cap, and a rushed exit is precisely the kind that produces one.

FAQ

Does the six-month rule apply to employees I already have, or only to new hires?

It applies to anyone with six months' service by 1 January 2027, including staff already on your payroll. If someone started with you on or before 1 July 2026, they will already have passed six months by the time the change takes effect, so their position changes on that date regardless of when they were hired.

What happens to the two-year rule between now and January?

It still applies. Any dismissal with an effective date of termination before 1 January 2027 is governed by the current two-year qualifying period. The new six-month rule only takes effect for terminations on or after that date.

Is there a new statutory probation period I need to put in place?

No. An earlier version of the Bill proposed a nine-month statutory "initial period of employment" with a lighter dismissal process attached. That was dropped before the Act passed. Probation remains a contractual arrangement with no special legal status, and it offers no protection once an employee reaches six months' service.

Is unfair dismissal compensation really uncapped from January?

The cap on the compensatory award is removed, yes, but that does not mean unlimited awards in practice. Compensation is still based on actual and projected financial loss, and tribunals still reduce it for poor mitigation or contributory conduct. Removing the cap matters most for higher earners, whose losses can otherwise run well past the current ceiling of roughly a year's pay.

Can I still dismiss someone during probation without risk?

You can, but the safe window is shorter than six months. If you dismiss without giving statutory notice, the law treats the termination date as falling a week later, which can tip an employee from under six months' service to over it. Decide and act with enough margin, and make sure notice is given or paid.

Does this change apply across the whole of the UK?

It applies in England, Scotland and Wales. Employment law is devolved in Northern Ireland, where the two-year qualifying period is unaffected.

The date is not moving

The regulations are made, the government has said it will not consult further, and 1 January 2027 is a little over five months away. What is still open is whether the people decisions you have been deferring get made before it or after it, and whether the process behind them would survive being examined.

If you have someone on the payroll with between six months and two years' service, and you are not confident that the way that relationship has been handled would hold up if it ended in February, send a short message through the chat on this page. You will get a direct read on where the exposure actually is, what your probation and early performance process needs to change before January, and which of the decisions you are currently deferring are affected by the date.

It comes straight back from me or someone on the team, usually the same day.