From 1 January 2027, any employee you have hired can claim unfair dismissal after just six months - down from the current two years. If you hired anyone from July 2026 onwards, that clock is already running. SMEs without documented probation processes face real legal and financial exposure in the months ahead.
What changed on 6 April 2026?
The Employment Rights Act 2025 came into force in phases. The April 2026 changes were the most immediate:
- Statutory Sick Pay (SSP) is now payable from day one of absence. The three-day waiting period is gone.
- Paternity leave and unpaid parental leave became day-one rights. The 26-week qualifying period was removed.
- The Fair Work Agency launched on 7 April 2026 with powers to investigate non-compliance, issue underpayment notices, and bring enforcement proceedings.
Every new starter now has legally enforceable rights from their first day on payroll - before you have had any meaningful opportunity to evaluate them.
When does the unfair dismissal change take effect?
The qualifying period for unfair dismissal claims drops from two years to six months on 1 January 2027. Any employee hired from July 2026 onwards reaches that threshold on or around that date.
Previously, a standard six-month probationary period sat safely inside the two-year qualifying window. You had room to assess and, if necessary, exit new starters without significant legal risk. From January 2027, that buffer is gone. Any dismissal at or after six months needs a fair reason, a documented process, and evidence to support it.
According to Acas, unfair dismissal changes were cited as a top concern by 23% of employers surveyed on the Employment Rights Act. The removal of the cap on the compensatory award for unfair dismissal - also taking effect on the same date - further increases the financial exposure.
What does a legally defensible probation process now require?
Four things must be in place for every new hire:
- Written probation objectives agreed on or before the start date
- A mid-point review documented in writing with supporting evidence
- A formal end-of-probation outcome recorded with a decision and rationale
- Any performance concerns raised formally in writing - not just in conversation
Most SMEs with five to twenty employees currently manage this through a mix of memory, email threads, and ad hoc notes. That approach does not hold up when a claim arrives at an employment tribunal.
How can AI agents reduce this risk?
An AI agent connected to your HR platform or CRM can handle the process enforcement that most SMEs cannot resource manually:
- Trigger probation review reminders at weeks four, ten, and twenty-two automatically
- Generate a pre-populated review form based on the role and start-date objectives
- Log manager feedback against the employee record with a timestamp
- Flag any review that has not been completed by its due date and escalate to the business owner
This does not replace management judgement. It creates the documented audit trail that protects you if a claim is made - without adding a full-time HR administrator.
What about SSP and payroll?
Day-one SSP entitlement adds administrative load to every payroll run. For lower-paid employees below the standard weekly rate, SSP is now calculated at 80% of normal weekly earnings rather than at the flat rate. An AI agent monitoring absence records can calculate entitlement, prepare a draft figure for payroll approval, and flag edge cases - reducing the risk of underpayment, which falls squarely within the Fair Work Agency's enforcement scope.
What should you action now?
| Task | Target date |
|---|---|
| Update SSP and parental leave policies | Overdue - April 2026 already passed |
| Brief line managers on day-one rights | This week |
| Review probation documentation for all July 2026 hires | Before end of September 2026 |
| Implement automated review triggers | Before end of October 2026 |
| Confirm process is in place for all new starters | Before January 2027 |
The January 2027 date feels distant. For someone hired in July 2026, you have fewer than six months before they gain unfair dismissal rights - and fewer than four months to get your documentation process watertight.
Frequently asked questions
When does the six-month unfair dismissal qualifying period come into effect?
It takes effect on 1 January 2027. Any employee hired from July 2026 onwards will reach the six-month threshold on or around that date, meaning they can bring unfair dismissal claims far earlier than current law allows. The removal of the cap on compensatory awards also applies from the same date.
Do we need a formal probation process documented in writing?
Yes. From January 2027, dismissing an employee after six months requires a fair reason and documented evidence of a proper process. Verbal conversations and informal notes will not be sufficient if a claim reaches an employment tribunal. Written objectives, reviews, and outcomes are essential.
Does SSP really apply from day one of employment now?
Yes. Since 6 April 2026, SSP is payable from the first day of absence with no waiting period. Lower-paid workers who earn below the standard SSP rate receive SSP calculated at 80% of their normal weekly earnings, capped at the standard rate. Payroll systems must be updated to reflect this.
Can AI agents replace an HR manager for employment law compliance?
No. AI agents handle process enforcement - automated reminders, form generation, record-keeping, and escalation. They cannot make HR decisions or legal judgements. Their value is ensuring that documented evidence exists so that the human decisions a manager makes are defensible in a tribunal.
James Paulinson LinkedIn
Co-Founder, SMEAutomate
James Paulinson is the co-founder of SMEAutomate. With two decades across advertising, technology, and consulting, he focuses on helping boutique businesses and founders scale with AI-powered workflow automation.
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