The Two-Year Rule Is Going: Unfair Dismissal Protection Starts at Six Months in 2027

The two-year rule is going. From January 2027, unfair dismissal protection starts at six months.

From 1 January 2027, employees can bring an ordinary unfair dismissal claim once they have six months' service, reduced from the two years that has applied since 2012.

There are no transitional provisions, so anyone already employed on that date who has passed six months is protected immediately, and the statutory caps on unfair dismissal compensation are being removed at the same time.

For employers, the window to spot a bad hire and act cleanly shrinks by three quarters, and the cost of getting a dismissal wrong goes up. This is squarely an Employment Practices Liability exposure, and it is worth reviewing your EPL cover and your probation processes well before the date rather than after a claim lands.

What will be the impact on business insurance?

Alex Littlejohn, Director of Insurance Operations at REALLY HONEST comments on the importance of needing dedicated EPL insurance;

As tribunal claim volumes inevitably climb, having dedicated EPL insurance in place will be critical to protecting balance sheets from costly litigation.

As well as thinking about robust protection for their own business, founders/operations should also be aware that;

Shrinking the unfair dismissal threshold to six months while uncapping tribunal payouts places increased exposure on employers. Businesses will have significantly less time to address bad hires, and the cost of getting a dismissal wrong will be higher than ever.

Why it is changing

This comes out of the Employment Rights Act 2025. The original plan was a full day-one right, meaning protection from the first day of employment. The House of Lords pushed back and would not pass the day-one version, so the government settled on six months as the qualifying period.

The stated aim of the wider reform is to give employees earlier security and to modernise a framework the government views as tilted too far toward employers.

Angela Rayner, who introduced the Bill as Deputy Prime Minister, called it "the biggest upgrade to workers' rights in a generation."

The Act also strips out the power to change the qualifying period by secondary legislation, so any future move, in either direction, now needs a fresh Act of Parliament.

The history behind the two-year rule

The qualifying period has moved around a lot since unfair dismissal protection was first introduced by the Industrial Relations Act 1971. It started at two years, dropped to six months in 1974, rose to one year in 1979, fell back to one year territory through the 1990s, and was cut to one year in 1999.

It went back up to two years in 2012, applying to anyone who started on or after 6 April that year. The 2012 government justified the increase as giving employers and employees more time to resolve problems, giving employers confidence to hire, and easing pressure on employment tribunals.

So six months is not new ground. It is a level the UK has used before, and the 2027 change is closer to a return than an invention.

FAQs

Does this mean employees are protected from day one?
No. The day-one right was dropped. Protection begins at six months' service.

What about people already employed on 1 January 2027?
There are no transitional provisions. If someone already has six months' service on that date, they are protected straight away. New hires reach protection once they hit six months.

If I want to let someone go before they qualify, when do I need to act?
Earlier than the six-month mark. Notice periods and process time can push an effective dismissal date past six months even if you started the process before, so acting right at five months may not leave enough room. Build in a margin.

Do the usual exceptions still apply?
Yes. Automatically unfair reasons, such as dismissal linked to pregnancy, whistleblowing, or trade union activity, have never needed a qualifying period and still do not. Six months is the threshold for ordinary unfair dismissal only.

What is the insurance angle?
The likely rise in claims, combined with the removal of the compensation caps, increases Employment Practices Liability exposure. Review EPL limits and check your dismissal and probation procedures before the change takes effect.