Prepare For Employment Rights Act Reforms

by Amanda McCulloch

A Simple Recap

The Employment Rights Act became law just before Christmas 2025 and is intended to strengthen job security and encourage fairer workplace practices.

Within the Act, changes to unfair dismissal, reducing the qualifying period from two years to six months and removing the statutory cap on compensation (the lower of either 52 weeks’ gross pay, or £118,223), represent more than a technical change to employment law.

It’s a significant shift that impacts recruitment too because:

• Shorter qualifying periods mean employees gain protection sooner, increasing the importance of getting recruitment, onboarding and early performance management right.
• Removing the compensation cap raises the financial risk of a bad hire, potentially allowing much larger awards (compensation is limited by legal principles but the upper limit is no longer fixed by law).
• Organisations must assess the financial exposure relating to high earners because employees can recover long-term losses such as future earnings, employer pension contributions and benefits. This is particularly pertinent in today’s market of economic uncertainty and challenge. For instance, a CEO could take many months or even years to secure a new role.

Constructive Actions You Can Take Now

The new 6 months qualifying period will apply where the effective date of termination is on or after 1 January 2027, i.e. it impacts anyone employed from July 2026, so there’s a closing window of opportunity to prepare:

Robust recruitment

• Audit current recruitment and employee engagement practices and consider whether they are sufficiently robust to attract the best candidates.
• Involve line managers and invest time in defining role requirements and personal specifications.
• Engage your recruiters in workforce planning.
• Assess capability rigorously and introduce psychometric profiling. For senior level hiring conduct psychometric profiling for everyone in the leadership team to better understand complementary strengths and minimise homogeneity.

Formalise probation processes

• Despite the time, effort and resources invested in recruitment, onboarding is woefully overlooked. Take this opportunity to review onboarding and company culture integration because a new employee's first impressions are long-lasting. Employees who feel supported and informed are less likely to disengage or dispute decisions.
• Review the length of your probation period, around 3 months is likely to be appropriate. Review how probationary periods interact with disciplinary and performance management processes.
• Establish structured, regular check-ins every few weeks, with clear feedback and documented outcomes. Think of the probationary period as a supportive trial period.

Train line managers in early performance conversations

• Managers who address concerns early and respectfully are your business’s first line of risk management. Provide guidance and training to ensure that managers are aware of the importance of properly assessing performance during the probationary period.
• If they have been involved in the recruitment process, managers will be able to identify breakdowns in expectations or performance issues sooner and take action through early intervention and better communication.

Audit documentation and consistency

• Job descriptions and performance records should tell a coherent story that can be relied upon should a claim of unfair dismissal arise.
• Review contract terms, for instance benefits contingent on completion of probationary period and payment in lieu of notice.
• Review dismissal procedures.

Implications For Senior Executive Recruitment

At the senior level, these reforms are about governance, risk and reputation. Executive appointments are high-impact, high-visibility and, increasingly, high-liability decisions and hiring committees will now seek even greater confidence in their selection processes and decisions.

The changes directly impact service providers too. We’re already experiencing longer pre-appointment due diligence and higher levels of client communication during the search and selection process. There’s clearer articulation of what success looks like and more structured assessment and due diligence.

I'm encouraged by clients who engage with us in conversations that look beyond the initial placement and who are thoughtfully considering how the new hire's first year will be shaped.

This greater focus on quality and insight lends itself to our way of working as a trusted partner.

I do worry though that these changes will undermine confidence to commit to permanent appointments; less flexibility in the recruitment process will make it tougher for unconventional profiles to break through and overly onerous processes become red flags for top talent.

It’s in this environment that TMM Executive fractional executives become particularly relevant, not a substitute for permanent leadership but a complementary, affordable option.

A TMM fractional executive gives you flexible access to senior expertise without compromising on quality, providing a commercially sound solution when a full-time hire isn’t required or when more time is needed before making a permanent appointment.

Bear in mind that calling someone fractional doesn’t determine their legal status. It’s worth considering how you will engage these senior executives: reviewing the employment status and considering IR35 principles is a sensible step when hiring.

The reforms increase employer responsibility; they also encourage clearer communication and more intentional hiring. Get it right and it is an opportunity to reduce your exposure to risk and strengthen culture and performance.

In my opinion, these amendments have made good recruitment more valuable than ever.