Support from an HR consultant in Milton Keynes to help you understand the new dismissal rules and protect your business from costly claims.
The rules around dismissing employees in the UK have shifted.
If you run a small business, these changes affect you directly, and some of them are already in motion.
The financial exposure from getting a dismissal wrong is about to increase significantly.
As an HR consultant supporting businesses over the UK, I'm already working with business owners who need to update how they handle these situations before the new rules bite.
Here's what you need to know.
The law has changed and more is coming
Two major shifts are underway that change how dismissal works for every employer.
First, the qualifying period for unfair dismissal claims is dropping from two years to six months. Anyone you hire on or after 1 July 2026 will be covered by this shorter timeframe once the rules take effect in January 2027.
Second, the cap on compensation for unfair dismissal is being removed entirely from January 2027. Right now, there's a ceiling on what a tribunal can award in most cases. That ceiling is going.
On top of those two changes, the Fair Work Agency launched in April this year. It gives employees a new route to raise complaints and seek protection. The agency also has the power to audit your records and processes proactively, without needing a complaint from a worker first.
All of this adds up to a very different landscape for business owners who've relied on informal approaches to managing people.
Why the old approach won't work any more
For years, the two-year qualifying period might have felt like some breathing room. Some businesses chose to bring someone in, see how it went, and part ways without too much formality if things didn't work out.
That buffer is shrinking to six months.
It means a new starter could challenge their dismissal far sooner than before. And because there's no longer a cap on what they can claim, the stakes are considerably higher.
You can still dismiss someone. Nobody is saying you can't, however, it is advised that you demonstrate you followed a fair process and acted reasonably. Tribunals pay close attention to how you reached your decision, not just what the decision was.
Where businesses typically get caught out
I see the same patterns repeatedly when a dismissal goes wrong. Most of the time, the employer genuinely believed they were doing the right thing. The problem is they didn't document it properly or follow a clear process.
Some of the most common gaps include:
🟢 No structured probation process, so there's nothing to refer back to when performance concerns arise early on
🟢 Feedback given verbally but never recorded in writing
🟢 Performance issues left unaddressed for weeks or months, then acted on suddenly
🟢 Inconsistent treatment, where one employee is given multiple chances while another is let go for similar behaviour.
🟢 Managers acting on frustration rather than following a procedure
Any one of these can undermine your position at a tribunal. Combined, they make it very difficult to defend a claim.
The costs go well beyond a tribunal payout
When people think about the cost of a dismissal gone wrong, they usually think about the compensation figure. But that's only part of it.
A claim takes up a huge amount of management time. You'll be gathering evidence, preparing statements, and attending hearings when you should be running your business. Legal fees add up quickly. Your team feels the disruption and the stress, which can drag down morale across the board.
There's also the reputational side. Word gets around. If your business develops a reputation for handling people badly, you'll find it harder to attract and keep good staff.
Some employers end up settling claims they believe were fair simply because they lack the paperwork to prove it. That's a frustrating position to be in, and it's entirely avoidable with the right processes in place.
What to do right now
The businesses most at risk are those that have grown quickly without formalising their people processes. If your approach to HR has been largely informal up to this point, now is the time to tighten things up.
Start by looking at your employment contracts. Do they include clear probation clauses? Are the terms up to date with current legislation?
Then look at your disciplinary and grievance procedures. Are they written down? Do your managers know how to follow them? Are they actually being used consistently?
You should also consider whether probation reviews are genuinely happening. Not just scheduled, but carried out properly with notes kept on file. If someone isn't performing in their first few months, you need a documented trail that shows you raised it, gave them support, and followed a fair process before making any decision.
The first six months of employment matter far more now for anyone hired from 1 July 2026 onwards. How you onboard, review, and manage new starters during that window will determine whether you're protected or exposed.
If you're looking for HR consultancy services to help you get these foundations right, it's worth having that conversation sooner rather than later.
Questions worth asking yourself
Before you move on, take a moment to think about these:
➡️If you dismissed someone tomorrow, could you produce written records showing the steps you took?
➡️Do your managers know the difference between an informal chat and a formal process, and when to escalate?
➡️Are your probation reviews happening on time, with outcomes documented?
➡️Would two employees with the same performance issue be treated identically in your business?
➡️Have your employment contracts been reviewed in the last twelve months?
If the answer to any of those is no, or you're not sure, that's a sign there's work to do.
A good time to review your dismissal process is before you need to use it. I look at your documentation, your investigation steps, and how decisions are being made to spot where things would fall apart under scrutiny.
If you're already dealing with a situation, I can help you handle it properly so it doesn't escalate.
As an outsourced HR consultant, I work with small and medium businesses to make sure their processes are solid and their managers feel confident.
If you've recently let someone go, or you're thinking about it, get in touch. I'll give you a straight answer on whether your process stands up and what needs to change if it doesn't.
You can book a discovery call and we'll take it from there. 📱 0781 3084152 or email 📧 daxa@hrresultsltd.co.uk Taking your HR from 'to do' to 'done'.
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