This is the third of five articles on the upcoming changes to unfair dismissal rules and their impact on professional service firms.
Expiry remains a dismissal
Professional services firms frequently use fixed-term arrangements for client projects, parental leave cover, transformation programmes, trainee pathways and temporary demand. The Employment Rights Act 2025 does not change the established rule that non-renewal of a fixed-term contract is a dismissal. From 1 January 2027, an employee with six months’ qualifying service may bring an ordinary unfair dismissal claim.
That means “the contract simply expired” is not, by itself, a complete answer. The firm should identify the reason for non-renewal and follow a process that is reasonable in the circumstances.
Identify the true reason
The fair reason may be redundancy where the requirement for work has ceased or diminished. It may be some other substantial reason where, for example, an employee was engaged for genuine temporary cover and the permanent post-holder returns. Capability or conduct may be relevant in other cases. The label in the contract does not determine the legal analysis.
Clarity matters because the process and evidence should match the reason. If the work continues and is reassigned, a simple assertion that the project ended may be difficult to reconcile with the underlying facts. If the role disappears, the firm should consider consultation, selection issues and suitable alternative employment.
Professional services complications
Project-based staffing often cuts across departments and legal entities. An employee may be funded by one client matter but capable of working elsewhere. A secondee may have relationships in both the home team and host organisation. A trainee or junior professional may rotate through several groups. These features make it important to look beyond the immediate manager’s budget or assignment.
Before deciding not to renew, firms should establish what work is genuinely ending, whether comparable vacancies exist, who has relevant knowledge of the employee’s skills and whether an alternative placement is feasible. A documented search is generally more persuasive than a broad statement that no roles were available.
Plan before the end date
A fixed end date can encourage delay because everyone knows when the contract expires. Yet a fair process cannot sensibly begin after the decision has become irreversible. Firms should build lead-in dates into a central register and trigger review early enough for meaningful consultation, consideration of alternatives and an appeal where appropriate.
The six-month threshold makes short contracts particularly important. An employee recruited for nine or twelve months may have ordinary unfair dismissal protection well before the intended expiry. Statutory notice should also be considered when calculating service.
Written reasons and consistent communication
From January 2027, the qualifying period for an employee’s statutory right to request written reasons for dismissal also falls to six months. Firms should assume that the rationale for non-renewal may need to be articulated clearly and scrutinised later.
Communications should be accurate, consistent and respectful. Recruitment promises, extension discussions, client comments and internal emails may all become relevant evidence. Managers should avoid presenting renewal as guaranteed before approvals are complete, but equally should not describe a decision as provisional if it has already been made.
Create a contract-end control
A practical control is a monthly fixed-term and secondment report owned jointly by HR and the relevant business leader. It should record start date, anticipated end date, notice provisions, business rationale, decision owner, consultation trigger and potential alternatives. For firms with matrix structures, the review should include both the local team and wider resourcing function.
This is not simply legal housekeeping. Early visibility supports better deployment of skilled staff, reduces rushed recruitment and gives clients greater continuity. The January 2027 reform makes that operational discipline more valuable.
Questions for leadership
Firms should ask whether HR has visibility of every fixed-term arrangement, including contracts managed locally by project teams, overseas groups or acquired businesses. They should also consider who searches for alternative work and how wide that search should be across offices and service lines. Clear ownership reduces the risk that a contract reaches its end before anyone has examined the legal reason, available alternatives or required process.
Practical next step: Create a central register for fixed-term, project and secondment end dates, with an early trigger for consultation, redeployment checks and written reasons.
Please contact our Employment Team on 0345 646 0406 or fill in our online enquiry form and we will be more than happy to help.