Probation in the spotlight – How are they impacted by the Employment Rights Act 2025

The Employment Rights Act 2025 (ERA 2025) introduces some of the most significant changes to UK employment law in decades, with reforms beginning in 2026 and continuing into 2027. One area set to become increasingly important is the effective use of probationary periods. Historically treated by some employers as a procedural formality, probation will soon become a crucial legal safeguard as dismissal rights strengthen and employee protections expand.

What employers need to know — and why it counts

Earlier protection from unfair dismissal

Although the Government originally trialed unfair dismissal being a ‘day‑one right’, parliamentary "ping-pong" ultimately delivered a different, but equally significant, headline change: the unfair dismissal qualifying period will fall from two years to six months from 1 January 2027. This dramatically changes how many employers approach assessing the suitability of their new recruits.

Previously, employers could rely on the two‑year window as a buffer from unfair dismissal claims, but as of January 2027 that protection will disappear.  This effectively means anyone with 6 months service as of 1 January 2027 will have the right to bring an unfair dismissal claim.  Therefore, staff you recruit from this point onwards (and already have in the last year) will not require the full 2 years' service to bring a claim.

This change means that employers will need to assess the suitability of their new recruit much sooner to decide if they are right for the role.  For some, this will mean a change in practices and a proper use of probation periods to properly assess an employee's capability and suitability for the role.

The ERA 2025 does not change other areas of law where employees may have the right to bring an automatically unfair dismissal claim without qualifying service such as under the Equality Act 2010 (for dismissals which are discriminatory on grounds of a protected characteristic), whistleblowing, asserting a statutory right, dismissal connected to family reasons such as maternity, paternity or adoption rights etc.

The combination of day‑one discrimination rights, and six‑month unfair dismissal rights, creates a far more challenging risk environment for early‑stage dismissals. Employers should therefore consider:

• Reducing probation periods to three months with limited ability to extend (by say no more than a month) so that the decision as to whether some should remain in their role is made much earlier.
• Train managers on the need to be more proactive in assessing the suitability of an employee during their probation period and raising any concerns through the probation process.
• Update probation policies and procedures to ensure concerns are documented properly with regular meetings to discuss progress and that the employee is clear on any areas of concern.

In addition, this change also places even more importance on getting recruitment right in the first place and making sure you have better ways of assessing the suitability of candidates before you offer them a role.  In the past some employers may have taken a view that they would offer some a role knowing that they would have time later to consider whether to keep them on.  If you are able to make better recruitment decisions, this will also make the initial probation period much easier and reduce the risk of unfair dismissal claims.

Abolition of the compensation cap for unfair dismissal

The shorter qualifying period isn’t the only major shift that employers need to be considering when dismissing staff. The statutory cap on unfair dismissal compensation, currently the lower of 52 weeks’ pay or £118,233, is set to be scrapped under the ERA 2025, paving the way for awards based on actual financial loss and significantly increasing employers’ exposure. Although the implementation date is still to be confirmed, this change is expected to take effect also from 1 January 2027.

This removal of the compensation cap will ultimately benefit more of those who are higher earners earning above £118k, but also those in niche/specialist areas where finding alternative employment in order to mitigate their losses is more difficult.  Also potentially for those in more geographically remote areas where there are limited options in the job market. 

There is some speculation that uncapped unfair dismissal awards may deter weaker discrimination or whistleblowing claims, but early signs suggest otherwise. The rise of AI drafting tools is enabling claimants to submit increasingly wide‑ranging pleadings, with many now pursuing every conceivable angle. Instead of narrowing disputes, technology is fuelling ever more complex, multi‑issue claims — some of which seem to include every allegation short of the kitchen sink!

Conclusion

The ERA 2025 marks a decisive shift in the protections available to employees early in their employment. With unfair dismissal rights arising after only six months, probationary periods are becoming a much more crucial stage for establishing expectations, reviewing performance, and making crucial employment decisions. The impact is already visible: anyone hired today will gain earlier unfair dismissal rights from 1 January 2027.

Employers that invest now in strengthening their probation processes will be in a far better place to minimise legal exposure and benefit from a more cohesive workforce. Long probationary periods can no longer be used as an easy buffer for short‑term resourcing needs - they now need to be purposeful, structured, and genuinely reflective of the role.

If you have any queries on the above, please reach out to our Employment team at Foot Anstey LLP, we're more than happy to help.