Performance management: what the 2027 unfair dismissal change means for your records

From 1 January 2027, the qualifying period for ordinary unfair dismissal in the UK drops from two years to six months.

The statutory cap on compensatory awards is also being removed.

These changes leave little room for errors.

Performance records, in particular, become far more important, especially as the cost of a decision you can’t evidence is no longer limited.

This change fundamentally shifts performance management from being purely a learning and development (L&D) activity to one that also safeguards your business.

Unfair dismissal: what changes on 1 January 2027

Three key unfair dismissal changes take effect on 1 January 2027:

• The qualifying period for ordinary unfair dismissal drops from two years to six months for dismissals where the effective date of termination falls on or after 1 January 2027.
• The qualifying period for protection against unfair dismissal relating to spent convictions is removed, so this becomes a day-one protection where the effective date of termination falls on or after 1 January 2027.
• The cap on compensatory awards is being abolished. Currently, a tribunal can’t award more than the lower of 52 weeks’ gross pay or £123,543 (the figure applying from 6 April 2026). From 1 January 2027, that ceiling is removed, so awards are limited only by the employee’s actual and projected financial losses.

It’s also worth noting, as it’s a consequence of the reduction in the qualifying period mentioned above, that employees can request written reasons for dismissal after six months instead of two years.

The transitional rule is easy to miss.

The changes apply where the effective date of termination falls on or after 1 January 2027.

That means the date the notice expires, not the date it’s given, so a dismissal notified in 2026 that runs into 2027 is caught.

Where the effective date of termination falls before 1 January 2027, the two-year qualifying period still applies.

Watch the notice trap.

Dismiss without full statutory minimum notice, and the qualifying period runs to the date that notice would have expired, so a late-December 2026 decision can land in 2027.

For more information, see the Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026.

You can learn more about the changes in the Department for Business and Trade unfair dismissal factsheet. For a wider view of the 2026 and 2027 changes, see our guide to UK employment law updates 2026

Introduction of stronger fire-and-rehire protections

Although not strictly part of the unfair dismissal qualifying-period reforms, the introduction of stronger fire-and-rehire protections is another significant dismissal-related change taking effect from 1 January 2027.

Dismissing an employee to impose contractual changes or re-engage them on less favourable terms will be automatically unfair in most circumstances.

A narrow exception will apply where the employer can demonstrate that the proposed changes were necessary to address serious financial difficulties threatening the viability of the business and that an appropriate process was followed.

What’s not changing, and what was dropped

There have been a few changes to the unfair dismissal proposals as originally set out, plus a few areas worth noting.

• Protection against discrimination and dismissal on automatically unfair grounds, such as whistleblowing, health & safety activity or trade union membership, applies from day one of employment. This already applied before the Employment Rights Act 2025 and it isn’t impacted by the 2027 change.
• The original unfair dismissal proposal set out to entirely remove the qualifying period, making it a day-one right. Following pressure in the House of Lords, the Government dropped that plan in November 2025 and replaced it with the six-month qualifying period.
• There was discussion around a statutory probation period. However, the proposed statutory probation period will not be taken forward. Contractual probation continues, with no defined legal status.

So, if you’ve been planning for day-one unfair dismissal rights or a statutory probation period, you’re building processes on outdated information.

As such, HR processes and pre-employment screening processes may need to be adjusted.

Use the above to aid your plans, and always check GOV.UK for the latest guidance.

2027 unfair dismissal changes: why your performance records become even more important

Under the current two-year qualifying period for unfair dismissal, employers had time to make a decision. 

Concerns raised at month five could be brought up in conversation, and if they weren’t resolved, the exit carried little unfair dismissal risk.

From 1 January 2027, the window to make a decision reduces significantly.

For many businesses, the new six-month qualifying period for unfair dismissal is the same length as their probation period.

Add to this that the cap on compensatory awards is being removed, and not only is there less time to make a decision, but the financial risk is far greater.

You don’t need more processes.

You need earlier processes, accurately documented.

This is where performance management comes in.

Employees need objectives set and documented, and any review conversations need capturing.

You also need to show that:

• The employee knew what was expected of them
• The employee was told where they fell short
• The employee was given a chance to improve

What a defensible performance record looks like

To minimise unfair dismissal risk, your performance management records need to clearly show what was expected, what actually happened, what was communicated and what support followed.

In practice, that means keeping:

• Objectives that are documented, dated and shared with the employee. Expectations living in a manager’s head won’t hold up in a tribunal.
• A record of each review or check-in. This should cover what was discussed, agreed and what should happen next.
• Evidence that the employee was made aware that they were falling short of expectations. You need the date this was communicated, as it establishes how long they had to respond. 
• What support or training was offered. You need to be able to show what was put in place to help the employee before you reached a dismissal decision. This should cover when it was offered, whether it was taken up and what happened afterwards.
• Any adjustments that were requested or made. Include who requested them and what was actually put in place.
• Probation review outcomes, with the reasons. Whether an employee passed or failed means little if there isn’t a record explaining how the decision was reached.
• Who made each decision, and when it was made. The last thing you want is a decision being challenged when the manager who made it has left. You need to capture who made which decision and why it was made.

We can’t stress enough how important good documentation is.

However, it’s only one part of the puzzle.

If requested, you must be able to easily retrieve this information – a task many businesses underestimate.

Notes stored in a manager’s inbox or on a personal spreadsheet are not only difficult to retrieve, but also disappear if the manager leaves.

Additionally, if an employee moves under a new manager, it’s an additional set of disconnected data you’d need to retrieve.

Ultimately, records that exist but can’t be found won’t help you if it comes to a tribunal.

It’s also worth noting that you need records to be retrievable, even after an employee leaves, should they bring a tribunal claim post-employment.

Our guide to UK payroll and HR compliance covers wider retention obligations.

Capability processes, the Acas Code and probation

Capability and conduct are two different problems.

Capability is someone attempting but not meeting the expected standard, whether that’s through skill, experience or health.

Conduct, on the other hand, is related to behaviour the employee can control.

Your approach should differ based on whether it’s a capability or conduct issue.

Poor performance should be handled through a development conversation, while a misconduct issue should be put through a disciplinary process.

Many employers use a separate capability procedure.

That is sensible, but it doesn’t sit outside the Acas Code of Practice on disciplinary and grievance procedures, which covers poor performance as well as misconduct.

The Acas Code outlines the following expectations:

• Clearly explain the problem to the employee
• Hold a meeting to discuss it
• Allow the employee to be accompanied
• Communicate the decision to the employee
• Give them the right to appeal

Failure to follow the Code does not itself create liability.

However, employment tribunals take it into account and, in the claims where that adjustment applies, can adjust an award by up to 25% where either party has unreasonably failed to follow it.

As for probation, there’s no statutory version.

That said, business.gov.uk guidance advises employers to consider how their probation period works alongside the new six-month qualifying period.

Using a six-month probation period could cause issues as it would end in line with the six-month qualifying period.

Performance management in relation to disability

Where performance difficulties relate to an employee’s disability, separate legal protections apply and the situation should be handled with care.

Discrimination protection is a day-one right and is unaffected by the 2027 change.

A capability process that overlooks this can be exposed, regardless of length of service.

Four practical points to keep in mind:

• A performance concern is a reasonable prompt to ask whether something underlying is in play.
• Reasonable adjustments should be recorded when they’re requested, agreed and put in place.
• Absence trigger points may need to be adjusted where the absence is disability-related.
• A capability process that ignores a known condition is weaker than one that documents how the condition was accounted for.

You need a record that shows the question was asked and that the answer was acted on.

How your HR software should handle performance management

To manage performance effectively, you need an HR system that creates defensible records.

Look for features such as:

• Objectives stored against the employee record, with dates and version history
• Review and one-to-one records that remain even if the manager changes
• Probation dates that prompt action
• Reasonable adjustments recorded against the employee record
• Records retained and retrievable, even after someone leaves the business
• Reporting that can pull data to show what has happened and when

IRIS Cascade and Staffology HR both hold performance records against the employee record.

Objectives, appraisals and progress sit alongside the employee’s HR data rather than in a separate system, with a version history against each objective.

Cascade suits organisations with more complex HR processes, whereas Staffology HR suits straightforward HR processes.

Both systems integrate with Kallidus Learn LMS, so development actions arising from reviews route directly into the training platform.

This blog is general guidance, not legal advice. Every situation is different, so get advice from an employment law specialist before acting on a dismissal or capability decision.

Performance management

Frequently asked questions (FAQs)

When does the unfair dismissal qualifying period change to six months?

On 1 January 2027. Employees with six months’ service or more on that date gain protection immediately, whereas others gain it on reaching six months. The change applies where the effective date of termination falls on or after 1 January 2027.

Is unfair dismissal becoming a day-one right in the UK?

No. The day-one proposal was dropped and replaced with a six-month qualifying period from 1 January 2027. However, discrimination and automatically unfair dismissal protections were already day-one rights and remain unchanged.

Is there a statutory probation period in the UK?

No. The proposed statutory probation period was not taken forward. Probation remains contractual with no defined legal status.

What performance records should an employer keep?

Employers should keep:

• Dated objectives that have been shared with the employee
• Notes from each review and one-to-one
• Evidence of where performance fell short and when the employee was told
• Support or training offered
• Any adjustments made
• Probation outcomes with reasons, and who decided what

Which HR software is best for performance management and reviews?

IRIS Cascade and Staffology HR both hold performance records against the employee record, so objectives, appraisals and progress over time sit with the rest of someone’s HR data. Cascade suits businesses with more complex HR processes. Staffology HR suits businesses with straightforward requirements.