Of all the changes introduced by the Employment Rights Act, there is one that employers may be dreading more than the rest.
Unfair dismissal protections are tightening while the cap on unfair dismissal compensation is being lifted, meaning that employers face an intense need to stay compliant or pay the price.
Keeping out of a tribunal case was already a good idea, but employers need to be taking extra care to understand the upcoming changes and prepare for them now.
What is changing with unfair dismissal protection?
1 January 2027 brings a two-pronged change to unfair dismissal protection.
The length of time a person can be employed without unfair dismissal protection drops from two years to six months, while the cap on compensation for a tribunal claim is being lifted.
Currently, there is a concern that employers could be factoring in the compensation claim when deciding to dismiss an employee.
Larger companies are typically in a position to absorb the cost of a tribunal case, particularly when the target is a lower-earning employee.
This is due to the current system having a cap in compensation, keeping it to the lower of one year’s gross salary or £188,223.
By removing the cap, the Government aims to better reflect the financial reality of being unfairly dismissed.
Tribunals will be able to determine the financial impact of the unfair dismissal and better consider the actual financial loss suffered.
What should employers do now?
New Year’s Day might sound like a long time in the future, but employers should not wait for Father Christmas to bring them the gift of employment law compliance.
Instead, a new approach to probation periods and onboarding staff is required and work on this can begin immediately.
Rather than the standard six-month probation, it will be safer to have a three-month probation once the rules change.
A final decision on employment must be made within five months of a person starting work to avoid any potential challenges of unfair dismissal.
Clearly, the time allowed for a person to settle into a business is being significantly reduced and there may be a shift towards more cut-throat probation periods.
More training may be needed to onboard employees, particularly if you have decided to offer them a permanent role.
There are times when it is necessary to dismiss a worker even after they have been in your employ for some time.
It will be more important to keep clear evidence of wrongdoing or poor behaviour so that you can avoid claims of unfair dismissal.
To understand the severity of the change, discrimination and whistleblowing cases also have scope for unlimited compensation, which indicates that unfair dismissal is being viewed with the same seriousness.
HR teams will need to be more vigilant about the performance and behaviour of employees, making swifter decisions than before.
Where an in-house team cannot keep pace, outsourcing HR services may be the key to keeping compliant.
We can provide you with ongoing support so that you are less likely to find yourself facing down a tribunal case.
Managers can be empowered to engage more honestly with new employees, knowing that they have the support of an expert HR team reviewing the decisions being made.
Face unfair dismissal changes with confidence by speaking to our team for professional HR support.
