This is the first of five articles on the upcoming changes to unfair dismissal rules and their impact on professional service firms.
A significant change for people-led businesses
From 1 January 2027, the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months. The same six-month period will apply to the statutory right to request written reasons for dismissal. In addition the statutory cap on the compensatory award for unfair dismissal will be removed.
The reforms apply in England, Scotland and Wales. They do not make every dismissal after six months automatically unfair, nor do they prevent firms from dealing with poor performance, misconduct, redundancy or another genuine business reason. They do, however, mean that many more decisions will need both a potentially fair reason and a reasonable process.
Why professional services firms are particularly exposed
Professional services businesses rely heavily on judgement, client confidence, technical quality and collaborative behaviour. Concerns are often nuanced: an employee may meet billing targets but damage client relationships, produce technically sound work too slowly, or struggle with delegation and supervision. Those issues can be harder to evidence than a simple attendance or output failure.
The traditional two-year period often gave firms time to assess an employee across several client cycles, appraisal rounds or busy periods. A six-month threshold is much shorter. In many firms it coincides with the end of probation, meaning that an employee may acquire ordinary unfair dismissal protection just as the business reaches its first fully informed view of suitability.
The date that matters
The new regime is intended to apply where the effective date of termination is on or after 1 January 2027. Employees who already have at least six months’ service at that point will gain protection immediately. Firms should therefore avoid assuming that a decision communicated in December necessarily falls outside the new rules. Notice arrangements matter because statutory notice can count towards continuous service, even where notice is not worked.
Existing day-one protections remain. Before six months, firms must still consider discrimination, whistleblowing, health and safety, family leave, trade union activity and other automatically unfair reasons. The reduced qualifying period adds another layer; it does not replace those risks.
Four changes to place on the risk register
First, the population able to bring an ordinary unfair dismissal claim expands considerably.
Secondly, employees with six months’ service can request written reasons for dismissal, making clarity and consistency more important.
Thirdly, the expiry of a fixed-term contract remains a dismissal, so non-renewal after six months must be handled fairly.
Finally, removing the compensatory award cap increases potential exposure, particularly for senior fee-earners, specialists and employees with substantial bonus, pension or benefits packages. Professional service firms typically pay higher wages than most other industries and therefore the risks posed by this change are greater, particularly for older employees or those with disabilities who may struggle more than most to find other work swiftly.
What firms should do before January
Start with a workforce audit. Identify employees approaching six months’ service, probationary reviews that have drifted, fixed-term contracts ending in 2027 and unresolved conduct or capability concerns. Align recruitment, onboarding, supervision and appraisal so that concerns are raised early and evidenced through specific examples.
Next, update dismissal, capability, probation and fixed-term procedures. Managers should understand that a protected dismissal remains possible, but shortcuts create avoidable risk. In a partnership-led environment, the strongest control is often simple: a consistent decision record covering the reason, evidence considered, alternatives, procedure and appeal.
Questions for leadership
Management committees should ask whether workforce data is reliable enough to identify the affected population, whether probation and appraisal processes operate consistently across practice groups, and who has authority to approve dismissal. They should also consider whether existing insurance, reserve and reporting arrangements reflect the removal of the compensation cap. A short readiness review now can expose mismatches between policy and practice before they become live disputes.
Practical next step: Identify every employee expected to have between six months and two years’ service on 1 January 2027 and review any live capability, conduct, redundancy or fixed-term issues.
Please contact our Employment Team on 0345 646 0406 or fill in our online enquiry form and will be more than happy to help.