The new six-month unfair dismissal rule: why hiring mistakes are about to get more expensive

From 1 January 2027, the qualifying period for ordinary unfair dismissal protection is due to be reduced from two years to six months. The current cap on compensatory awards is also being removed, although tribunals will still calculate compensation based on actual and projected losses. 

For years, many businesses have treated a six-month probation period as a reasonable safety net. Hire someone, review them during probation, and make a decision before long-term risk builds up.

That approach now needs tightening.

A person hired in July 2026 could have six months’ service by January 2027. If performance concerns have not been managed properly, documented clearly, and handled through a fair process, a dismissal that once felt low-risk could become much more exposed.

Why probation periods need to be taken seriously

The issue is not just whether someone has passed probation. The issue is whether the business can show a reasonable process.

That means:

• clear expectations from the start;

• regular review meetings;

• documented performance concerns;

• evidence of support or training where appropriate;

• a clear decision before the six-month point;

• proper HR advice where dismissal is being considered.

Where Precision can help reduce hiring risk

This change makes the front end of hiring more important than ever.

At Precision, we support clients in two practical ways.

1. Temporary-to-permanent hiring through Precision as employer of record

Some clients already use Precision to engage people on an initial three or six-month temporary contract, where Precision is the employer of record.

This gives the client a valuable working period before making a direct permanent commitment.

You can see the person in the role, assess their attitude, reliability, communication, technical ability and cultural fit before moving them onto your own payroll.

Where the assignment is structured correctly, the client gets a practical assessment window before the individual becomes their direct employee. That can be especially useful for roles where fit, pace, reliability or team behaviour are difficult to judge from interview alone.

This is not about cutting corners. It is about reducing risk by giving both sides time to make a better decision.

2. Permanent recruitment with a six-month rebate period

For permanent recruitment, Precision offers clients a six-month rebate period.

That is significantly longer than the common short rebate periods many recruiters work to.

Why do we do this? Because we back our process.

Our ten-step recruitment process is designed to reduce early hiring failure by properly qualifying the role, understanding the business need, screening candidates thoroughly, checking motivation, testing fit and managing expectations on both sides.

Over the last three years, our rebates have dropped by 12–17% year on year, which tells us the process is doing what it is supposed to do: improving hiring quality and reducing early fallout.

A longer rebate period gives clients confidence, but the real value is in getting the hire right before they start.

The message for employers

The new six-month unfair dismissal rule does not mean businesses should stop hiring.

But it does mean employers need to hire more carefully, manage probation properly, and avoid drifting through the first few months without documented reviews.

For some roles, a temp-to-perm route can give you a better view before making a direct appointment.

For permanent hires, a stronger recruitment process and a meaningful rebate period can give you more protection than a quick CV send-out and a short guarantee.

Hiring mistakes have always been expensive.

From January 2027, they may become more exposed too. If you are planning to recruit over the next few months, now is the time to think about the safest route.

To discuss your hiring plans contact the team today on 0116 254 5411.