A local HR expert is warning business owners that a major employment law change coming into force on 1 January 2027 will begin affecting hiring decisions from this summer.
Under the new rules, employees hired on or after 1 July 2026 could gain the right to claim unfair dismissal after just six months of service, instead of the current two-year qualifying period.
That means businesses hiring from July this year may face legal exposure as early as January 2027.
ZEST HR, an independent HR consultant based in Hampshire, says that many small employers are focusing on the wrong date.
“Most people hear 2027 and assume they have time,” Tara said. “But if you’re hiring from July 2026, the clock starts then. Six months later, you could be dealing with a claim if something hasn’t been handled properly.”
For businesses without structured HR processes, the shift significantly increases risk around early-stage employment decisions.
“It changes how you need to manage people from day one,” Tara explained. “Hiring, onboarding, probation and performance management all need to be more structured and better documented. You can’t rely on time as a safety net anymore.”
Employment tribunal claims were already rising before these changes.
Single employment claims are up 54 per cent year-on-year, according to Ministry of Justice statistics for Q3 2025/26. The average unfair dismissal award sits at £13,749, but once legal fees, management time and the cost of replacing an employee are included, the true cost is often significantly higher.
“A claim doesn’t just hit your finances,” Tara said. “It takes time, creates stress, disrupts your team and can affect your reputation. And with the compensation cap expected to be removed in 2027, the financial exposure is increasing.”
The introduction of the Fair Work Agency is also expected to strengthen enforcement, with powers to investigate businesses and bring claims on behalf of workers.
“This is a shift in how employment law is enforced,” Tara said. “It’s not just about whether an employee chooses to act. There is likely to be a body with the power to step in.”
Tara says that the priority for business owners now is getting their processes in place before the first wave of claims becomes possible.
“Six months goes quickly. If you hire someone in July and things aren’t working out, you need to show that you’ve followed a fair process. Without that, you’re exposed.”
To prepare, Tara recommends focusing on four key areas:
- Review employment contracts to ensure that they support fair and consistent processes
- Put structure into probationary periods, with regular reviews and clear documentation
- Train managers to handle performance issues early and keep proper records
- Get HR support in place before problems arise
“The businesses that act now will be in a much stronger position. The ones that wait until 2027 will find that they’re already behind.”
For a confidential conversation about how these changes affect your business, contact Tara on tara@zesthr.co.uk.
Zest HR has more than 20 years of experience and supports businesses across Hampshire with practical HR advice, compliance and proactive people management.
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Note to editor: Tara is available for further information and interviews on +44 798 393 6747.