Six Months, Not Two Years: What the Unfair Dismissal Changes Mean for Your Business

If you run a small business, chances are HR isn’t always at the top of your to-do list. 

You’re focused on customers, cash flow, winning new work and keeping everything  moving. But when you employ people, getting the people basics right matters, and  from 1 January 2027, it will matter even more. 

From that date, employees in England, Scotland and Wales will gain protection against  ordinary unfair dismissal after six months’ service, rather than two years. The existing  cap on compensatory awards for unfair dismissal will also be removed. 

For SME owners, that might sound like another employment law change to add to the  list. 

But the practical message is much simpler: those first six months are going to  matter more than ever. 

So, what does the six-month change actually mean for my  business? 

We’ve all seen it happen. Someone joins the business and things don’t quite feel right.  Perhaps their performance isn’t where it needs to be, communication is difficult or  they’re simply not settling into the role. 

In a busy business, it’s easy to think, “Let’s give it another few weeks and see how it  goes.” 

And then another few weeks pass. 

Clear expectations, regular conversations and meaningful probation reviews can help  you identify and address issues early, rather than allowing them to drift. 

Does this mean I need more HR processes? 

Not necessarily. 

For most SMEs, this isn’t about creating layers of paperwork or turning every  conversation into a formal process. It’s about making sure the basics are working. 

Are your contracts up to date? Do people know what’s expected of them? Are probation  reviews happening? Are your managers confident having difficult conversations? And if  there’s a performance issue, is it being addressed and documented?

What should I be doing now? 

Don’t wait until January. 

Review how you recruit, onboard and manage people during those crucial first few  months. Check your contracts and policies, review your probation process and make  sure managers know what to do if something isn’t working. 

Good HR doesn’t need to be complicated. And it shouldn’t start when something has  already gone wrong. 

It should help stop things going wrong in the first place. 

Want to talk it through? 

Come and meet the Lodge Court team at Stand B754 at The Business Show, ExCeL  London, 11–12 November. We’ll be there talking about the everyday people challenges  that come with running and growing a business. 

Or visit the Lodge Court website: www.lodgecourt.com to find out more about how  we support SMEs.