Six-Month Unfair Dismissal Rule Takes Effect Under the UK Employment Rights Act

From 1 January 2027 employees can claim ordinary unfair dismissal after six months of continuous service, replacing the two-year threshold. The change applies across England, Scotland and Wales and removes the £123,543 compensation cap.

Employment unfair dismissal regime

The Employment Rights Act 2025, passed Dec 2025, also bans fire-and-rehire, ends exploitative zero-hour contracts, makes flexible working the default, and extends parental and bereavement leave to day one. The Fair Work Agency (Apr 2026) enforces these rules.

Employment Rights Act roadmap: everything employers need to know

Average unfair-dismissal awards in Sep 2025 were £13,700 (median £6,747). ACS’s 2026 survey shows 96 % on permanent contracts and one-third with >10 years tenure. Early-conciliation now 12 weeks; claim limit six months.

Employment unfair dismissal regime

Employers now have six months to assess new hires, prompting tighter probation periods and documented performance plans. Uncapped compensation raises exposure for high-earning staff, affecting settlements and insurance. Guaranteed-hours and shift-notice rules add admin burden, especially for retailers.

Employment unfair dismissal regime

Government briefings call the reforms a “generational shift”. The Fair Work Agency will provide guidance. Matthew Howse (Morgan Lewis) warned many firms may underestimate practical implications and employee-engagement needs.

Are UK Employers Ready for New Trade Union Rights? , Counsel Without Borders

ACS chief executive Ed Woodall said guaranteed-hours and shift-notice proposals could raise costs and complexity for retailers already facing higher taxes, and warned they might curb flexible employment for both sides.

ACS highlights convenience sector’s two-sided employment flexibility

The Edinburgh Chamber notes the compensation-cap removal mainly benefits high-earners, but most awards stay below the former limit, creating uncertainty. Guidance on pregnant-worker protection and guaranteed-hours remains unpublished.

Employment unfair dismissal regime

• “ACS chief executive Ed Woodall said: “Local shops are responsible employers, offering store colleagues regular hours and notice of shifts.” — Ed Woodall, Chief Executive, Association of Convenience Stores

ACS highlights convenience sector’s two-sided employment flexibility

• “We support the government’s aim of addressing one-sided flexibility, but these proposals risk adding further cost and complexity at a time when retailers are already facing significant pressure from higher business taxes and increased regulation.” — Ed Woodall, Chief Executive, Association of Convenience Stores

ACS highlights convenience sector’s two-sided employment flexibility

• “It is important that any new rights do not inadvertently reduce flexible employment opportunities for both employers and employees or add unnecessary costs to hiring in an already tight labour market.” — Ed Woodall, Chief Executive, Association of Convenience Stores

ACS highlights convenience sector’s two-sided employment flexibility

• “He noted that many organizations may be underestimating the practical implications of the reforms and the need to prepare for greater employee engagement, collective bargaining activity, and workforce-related compliance considerations.” — Matthew Howse, Partner, Morgan Lewis

Are UK Employers Ready for New Trade Union Rights? , Counsel Without Borders

The six-month rule and cap removal take effect 1 Jan 2027. Employers should revise probation policies, strengthen performance-management, and review insurance. A guaranteed-hours consultation runs to 25 Aug 2026; final guidance from the Department for Business and Trade is due later 2026.

ACS highlights convenience sector’s two-sided employment flexibility