The Employment Rights Act 2025 introduces significant changes to unfair dismissal rights. In this episode, Claire Rosney, Professional Development Lawyer at Browne Jacobson, and Emma Capper, Head of Employment, walk through what is changing, when it takes effect, and what your organisation needs to do now. 

Background 

The government's original manifesto commitment was to give all employees day-one protection from unfair dismissal. Following opposition from the House of Lords, those proposals were scaled back but still represent one of the most significant changes under the Act. From 1 January 2027, the two-year qualifying period for ordinary unfair dismissal protection will be reduced to six months, and the compensatory cap, both the £118,223 financial limit and the 52 weeks' gross pay ceiling, are removed entirely. 

What the episode covers 

The two core changes: How the qualifying period reduction and the removal of the compensatory cap came about, and why the cap change in particular caught many by surprise, introduced as a late amendment with no prior consultation. 

Why six months looks permanent: The government has removed the power to vary the qualifying period by regulations. Any future change requires primary legislation, making it more difficult for future governments to increase the qualifying period. 

How the commencement date works in practice: All employees with six months' service on 1 January 2027 will qualify immediately. That includes anyone recruited as far back as the start of 2026, and anyone starting from the end of June this year. 

The statutory notice trap: If an employer dismisses an employee in the final week of their first six months, that employee may already have qualifying service. The one week of statutory notice, whether given or paid in lieu, is added to the dismissal date, extending the effective date of termination meaning the employee qualifies for protection. 

Impact on senior executive exits: Without a cap, highly paid employees will find the Employment Tribunal an attractive forum for the first time. Successful claimants can recover compensation for pension loss, share schemes, long-term incentive plans and bonuses, making exits that were once straightforward to negotiate significantly more complex and costly. 

What to do now: Emma and Claire set out the practical steps organisations should be taking ahead of January 2027, including reviewing probationary period lengths (three to four months is likely more appropriate than the current norm of six), tightening pre-employment screening, training line managers on conducting effective probation reviews, and ensuring any process that could lead to dismissal is supported by a robust and contemporaneous evidence trail. 

The board-level consideration: Boards should be actively thinking about how they manage executive recruitment and underperformance. The landscape for managing senior exits is about to shift fundamentally. 

Key takeaway: All organisations should start taking steps to prepare for the change now.  

For the latest updates and guidance, visit Browne Jacobson's Employment Rights Act 2025 hub at brownejacobson.com/employment-rights-act