Much of the discussion around the Employment Rights Act 2025 has focused on what happens after 1 January 2027.
But the most important question for organisation’s now is: what should we be doing before then?
The reduction in the qualifying period for ordinary unfair dismissal rights from two years' service to six months will fundamentally change how many organisations approach employee relations. Combined with the proposed removal of the cap on unfair dismissal compensation, it has the potential to increase both the volume and value of employment tribunal claims.
Here’s my view on the practical steps you can be doing this side of Christmas to prepare.
Look at the issues you’ve been putting off
Most organisations have at least one.
The employee whose performance never quite improved after probation.
The manager who has raised concerns informally several times but never documented them.
The senior employee whose behaviour causes frustration but who continues to deliver results.
The person everyone agrees is "probably not the right fit" but no one has quite got round to dealing with.
In many cases, these situations drift not because leaders are unwilling to act, but because other priorities take over and difficult conversations inevitably take a back seat.
With the changing legal landscape, an issue that currently sits within a relatively low-risk category may look very different in the New Year, so it’s time to face the issues you’ve been putting off.
Conduct an end of year review
As part of year-end planning, employers should be asking:
Are there employees with less than two years' service whose performance remains below the required standard?
Have concerns been raised but never properly addressed?
Are probation reviews being completed consistently?
Have managers had the conversations they should have had?
Is there anyone where a clear decision needs to be made rather than allowing the situation to continue indefinitely?
For many businesses, the run up to the end of the year provides a natural opportunity to review these questions, and that coincides with the short window available before the changes take effect.
Assess the risk of senior employees
When we talk about performance and conduct, often the focus is on junior or mid-level employees.
However, the planned removal of the cap on unfair dismissal compensation has the potential to make claims significantly more attractive for senior employees and higher earners, and will certainly increase the bargaining position of an employee in exit negotiations.
As a result, organisations should also be reviewing situations involving senior employees where concerns exist but action has been delayed.
This is not about engineering exits before the law changes. It’s about recognising where unresolved issues exist and deciding whether they should be addressed now rather than carried forward into a more complex and expensive risk environment.
Consider your management capability
Most employment disputes that I deal with do not arise because organisations deliberately make poor decisions.They arise because issues are identified early but left unresolved for months.
A manager notices performance concerns but hopes things will improve.
Conduct issues are tolerated because the individual is technically strong.
Feedback is softened to avoid conflict.
Probation meetings are postponed.
Documentation is never completed.
Eventually, the organisation reaches a point where the issue can no longer be ignored and the options available are far more limited than they were at the start.
The organisations that adapt most successfully to the new regime will be the ones with managers who are confident enough to identify and tackle problems early, give honest feedback and make well-informed decisions when performance or conduct falls short. Be honest with yourself, do your managers have the right level of capability and have you trained them appropriately?
The key takeaway
Over the years, I've seen very few employment issues that appeared overnight.
Most start as a concern that somebody noticed six months earlier:
A performance issue that wasn't documented.
A conduct issue that wasn't challenged.
A difficult conversation that was postponed.
As we move towards 2027, now is a sensible time to review those unresolved issues and decide whether action is needed.
Concerned about a performance issue, conduct problem or potential senior exit? Get in touch to discuss how New Road can help you assess the risks and plan the most appropriate next steps.
This post provides general information for business owners, not legal advice, and you should always take advice on your specific situation before acting.
