Are You Ready for 1 July 2026? The Two-Year Rule Is About to Change

Employment Rights Act 2025 unfair dismissal: one week to go

Picture this. You hire in spring, it wobbles by month three, and you assume the old two-year rule gives you cover. Under the Employment Rights Act 2025 unfair dismissal protections kick in far earlier. From Wednesday 1 July 2026, the easy exit in year one stops being safe.

For years, many SMEs worked to a rough test: under two years, easier to let go. That was never absolute, and from next week it's out of date. So grab a brew. We'll get you ready.

What's changing on 1 July 2026?

Right, first things first. Here's the shift in plain English.

Before 1 July

• Ordinary unfair dismissal protection usually started after two years' continuous service.
• Under that threshold, you had wider room to act, though discrimination and automatic reasons were always off limits.

From 1 July 2026

• Protection applies far earlier in employment.
• A new statutory probationary period applies. It gives a lighter-touch, but still fair, route for early exits.
• You'll still need a fair reason and evidence. Lighter does not mean no process.

The headline: dismiss freely in year one is over. You must set expectations, give feedback, and keep a simple paper trail.

Two important notes

• The exact probation window and steps sit in the regulations and ACAS guidance. Check current guidance before you dismiss.
• This Act rolls out in phases. Some parts landed in April 2026 and others arrive in 2027. The unfair dismissal shift is the one that bites now.

> Expert view: ACAS says, "Employees have the same rights during a probation period as any other employee." Source: ACAS guidance on probation periods.

Suggested stat to include on publication: latest HMCTS Employment Tribunal statistics for single unfair dismissal claims (2024 to 2025). Source: GOV.UK HMCTS tribunal statistics.

Why this matters for small businesses?

Big employers have policy, process and people to run it. You have your good judgement and a contract template from 2019.

Gut feel still matters. On its own, it's now a risk. The change rewards employers who can show they hired with care, set clear goals, gave real feedback, and acted early and fairly. It punishes the classic SME pattern: swerve the awkward chat, hope for a miracle, then sack at month ten with nothing in writing.

Here's the good bit. What protects you in law also builds a better team:

• Clear expectations
• Honest, timely feedback
• A simple, tidy record

That is good management. The Act turns it into legal self-defence.

The five places SMEs will get caught out

After two decades doing this, here are the trip wires I expect to see.

1. Treating probation like a tick-box

A token chat at month three with no goals or feedback is useless now. The statutory probation route helps only if you use it, set targets, review, and document.

2. No written record

If concerns were raised "in passing" with no notes, it looks like the dismissal came from nowhere. From 1 July, your paper trail is the difference between fair and unfair.

3. Out-of-date contracts and offers

Documents built on the old two-year logic need new wording. Day-one written particulars are already a must. Now they need to be right.

4. Managers dodging tough conversations

The costliest habit in any SME is the manager who avoids saying it isn't working until it's on fire. That was risky before. It's legal exposure now.

5. Assuming "they're new, so I'm fine"

That belief ends next week. Retire it now.

What to do this week, and just after?

You've got about a week. Here's the order I'd use.

This week

• Update your contract, offer letter and probation clause so they reflect the statutory probation process. If you fix one thing, fix probation.
• Pull a list of everyone in their first months. For each: are expectations clear, have you given honest feedback, is any of it written down?

Build the habit

• Make probation reviews real. Short, structured checkpoints at weeks 4, 8, 12. Expectations, progress, what must change. Signed and dated. Fifteen minutes.
• Get feedback in writing. A brief note after a chat: what you discussed, what was agreed. A short email to yourself counts.
• Brief your managers. "New" is no longer a free pass. Early, honest, recorded feedback is part of the job.

Before you dismiss

• Check the current rules for your case. The probation route has defined steps. Take advice before you act. A rushed decision is where the cost lands.

Useful guidance: ACAS overview on unfair dismissal and procedures

Mythbuster corner

• "I can give notice of the change and carry on." No. Statutory rights sit above your contracts.
• "My flexibility or probation clause covers me." A clause supports a process. It cannot remove a statutory right.
• "This kills hiring for small firms." It changes how you hire and manage probation. You can still part ways fairly and early if it's not right.
• "It's not live until 2027." Some parts are later. The unfair dismissal shift is 1 July 2026.

The seven-minute action list for this week

If you do seven things, do these.

1. Open your standard contract and find the probation clause. If it leans on the old two-year rule, rewrite it.

2. List everyone in their first few months. That's your priority group.

3. For each, confirm expectations and capture any feedback in writing.

4. Diarise structured probation reviews for new starters at weeks 4, 8, 12.

5. Send managers a two-line heads-up: new no longer means easy to dismiss, feedback must be honest and recorded.

6. Bookmark our Employment Rights Act advice page and take the free HR Health Check.

- Employment Rights Act Advice: https://kateunderwoodhr.co.uk/employment-rights-act-advice

- Free HR Health Check: https://kateunderwoodhr.co.uk/hr-health-check

7. Listen to this week's Buzzing About HR, the 1 July countdown episode.

- Podcast: https://kateunderwoodhr.co.uk/podcast

Quick reference: before vs after

FAQs

• What is the statutory probationary period under the Employment Rights Act 2025?

It's a defined early window where a lighter fair process applies for new starters. The exact length and steps are in the regulations and ACAS guidance.

• Does this stop me dismissing in the first few months?

No. You can still exit fairly and early, but you need a valid reason and a simple, evidenced process.

• Do employees on probation have fewer rights?

No. ACAS is clear: employees have the same rights on probation as at other times.

• What should my probation clause say now?

It should reference the statutory probation framework, set checkpoints, state possible outcomes, and make clear that fair process will be followed.

• Do I need a full disciplinary for a probation exit?

Not the full version. Use the statutory probation steps and keep it fair, transparent and documented.

• Where can I get practical help to update contracts and train managers?

Start with our Employment Rights Act Advice page and book a free HR Health Check. We can also update your contracts and run manager briefings.

Final thoughts and a friendly nudge

This isn't the end of parting ways with a hire who isn't right. It's the end of doing it carelessly. Make probation mean something, write things down, and coach your managers. Do that, and 1 July is a footnote, not a fire drill.

Need a hand?

• Employment Rights Act Advice: https://kateunderwoodhr.co.uk/employment-rights-act-advice
• Book a free HR Health Check: https://kateunderwoodhr.co.uk/hr-health-check
• Book a discovery call: https://kateunderwoodhr.co.uk/discovery-call
• Listen to Buzzing About HR: https://kateunderwoodhr.co.uk/podcast

Kettle on. Standards up. Until next time, keep buzzing and take care of your people!