Employment Rights Bill | Unfair Dismissal

Employment law changes will give employees the right to claim unfair dismissal from six months in, removing the two-year qualifying period.

January 2026 Update - Confirmed finalised rules on unfair dismissal

The Act has finalised, and this provision has altered significantly. The final rules on unfair dismissal rules include:

• The House of Lords proposal to scrap the “Initial Period of Employment” phase and make unfair dismissal a day one right, was accepted.
• The rules are more straightforward, in that the qualifying service to raise this claim will change from 2 years to 6 months.
• ETA – employees who have six months qualifying service on 1 January 2027.
• The Bill removes the statutory power to change the qualifying period by order.
• This means future changes will be harder to pass and must be made through primary legislation.
• Compensation cap on unfair dismissal to be removed.
• Currently it is either 52 weeks gross salary or a statutory cap set at £118,223 (whichever is lower).
• We are unsure on the implementation date, but it could align with the introduction of the 6 month qualifying service to raise the claim (1 January 2027).

This change in qualifying service from 2 years to 6 months is simpler than the initial proposal and will be a welcome change for retailers, as it means less change for how probationary periods operate. Do still keep in mind that automatic unfair dismissal rights still apply, such as discrimination and being dismissed for raising a health and safety concern, or whistleblowing.

When the compensation cap is lifted, any claims raised by high earners within the business could be quite substantial, so making decisions on their suitability for your business will be crucial sooner rather than later.