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Probationary periods have long been a useful tool for employers. They give both sides a chance to work out whether a new hire is right for the role and make it easier to bring the relationship to an end if things aren’t quite working out.
However, with the Employment Rights Act 2025 changes coming into force in January 2027, employers may need to rethink how they use probationary periods and manage performance during those crucial first few months.
For startups, scale-ups and other growing businesses, the changes to probation periods and unfair dismissal rights in 2027 will make effective performance management and properly drafted employment contracts more important than ever.
January 2027 might still feel some way off, but businesses recruiting now should already be planning ahead. Employees who start work on or before 1st July 2026 will acquire protection from unfair dismissal on 1st January 2027.
That means employers hiring during 2026 should review their probationary processes now. The aim is to make sure performance concerns are identified and addressed as early as possible and that employment contracts are fit for purpose before the new rules take effect.
Many employers currently use probationary periods of between three and six months, often with the option to extend them for a further three months.
Historically, this has worked well because employees did not acquire unfair dismissal protection until they had completed two years’ service. Under the upcoming reforms, however, employees will acquire unfair dismissal rights after just six months.
These Employment Rights Act 2025 changes will significantly reduce the time employers have to identify performance concerns and decide whether a new hire is right for the business.
There is also an important detail employers need to be aware of: the statutory minimum notice period of one week is added when determining whether an employee has protection from unfair dismissal.
In practice, this means that, from January 2027, if you want to dismiss an employee before they acquire unfair dismissal rights, their employment will need to have ended at least one week before they reach six months’ service.
Employers will need comprehensive and robust probation clauses in their employment contracts. They’ll also need to consider whether the length of their probationary periods appropriately manages the risks faced by the business.
Just as importantly, managers will need to assess an employee’s suitability much earlier than they may have done previously.
Waiting until the end of a six-month probation period to decide whether someone is meeting expectations will leave very little time to act. If the individual is underperforming, the employer may then need to follow a much more formal and lengthy process.
In other words, leaving that difficult conversation until the six-month review is unlikely to be the best strategy.
One of the biggest risks we see in practice is managers allowing concerns to drift during probation.
Issues might be raised informally but never documented. Expectations aren’t always communicated clearly. Difficult conversations are postponed in the hope that performance will improve on its own.
Unfortunately, that can create significant risk and employee relations issues if concerns remain unresolved as the six-month deadline approaches.
It can be particularly problematic if the employee alleges there was an unlawful underlying reason for the dismissal and the employer cannot demonstrate that it had legitimate concerns about performance or conduct.
Clear expectations, regular conversations and proper documentation will therefore become even more important when managing performance during probation.
This doesn’t mean probationary periods of six months or longer will become obsolete.
There may still be good commercial reasons for keeping a longer probation period, particularly where a role is senior, technically complex or requires more time for a fair assessment.
In these circumstances, employers may still benefit from the shorter notice period that often applies during probation, even where the probationary period continues beyond six months.
However, once the employee has acquired unfair dismissal rights, a much more thorough process will need to be followed before making any decision to dismiss. The employer will need both a lawful reason and a fair dismissal process, which could require considerably more time and resources.
Employers should start considering whether their existing arrangements are ready for the changes ahead.
That means reviewing:
Reviewing your probation policy, employment contracts and performance management processes now can help reduce the risk of unfair dismissal claims once the new rules take effect.
Need help preparing for the Employment Rights Act 2025? Founders Law’s employment lawyers support startups, scale-ups and established businesses with employment contract reviews, probation policies, performance management and unfair dismissal advice.
We can advise you on the approach that will work best for your business, review your contracts and probationary processes, and train your managers on effective performance management - helping you prepare for these significant changes well before January 2027 arrives.
