Insight from an HR consultant in Ipswich on the recent employment law changes that make dismissals far more costly for small businesses.
I’ve been having a lot of conversations with business owners lately about letting people go.
Most of them are still operating as though the old rules apply. They’re not.
The Employment Rights Act has shifted the ground beneath your feet, and if you haven’t updated how you handle dismissals, you’re carrying more financial risk than you realise.
The changes are already in motion, so let me walk you through what’s happening and what you need to do about it.
The rules around dismissal have changed
Until recently, employees needed two years of continuous service before they could bring an unfair dismissal claim. That gave most small businesses a comfortable window to assess new hires and part ways without too much formality.
That window has shrunk dramatically. The qualifying period is dropping to just six months.
Anyone you’ve hired on or after 1 July 2026 will gain protection under the new rules once they take effect in January.
On top of that, the compensation cap for unfair dismissal claims is being removed entirely from January 2027. Right now, there’s a ceiling on what a tribunal can award. Soon, there won’t be one.
Think about what that means in practical terms. A claim that might previously have been capped at a manageable figure could now result in a much larger payout. The financial exposure for your business has gone up considerably.
There’s also a new enforcement body to be aware of
The Fair Work Agency launched in April this year. It gives employees another route to raise complaints and seek protection. But it also has the power to audit your records and processes proactively, without needing a complaint from a worker to trigger an investigation.
For businesses that have been relying on informal systems, or that don’t keep thorough records, that’s a real vulnerability.
What I’m seeing with clients right now
A lot of the businesses I work with have grown quickly. They’ve been focused on winning work, building teams, keeping customers happy. HR processes have been bolted on as an afterthought, if they exist at all.
The problem is that these are exactly the businesses most at risk under the new rules. When dismissal was a relatively low-risk operational decision, informal approaches could work. Now, tribunals will look closely at how you made your decision, not just what decision you made. If you can’t demonstrate that you followed a fair process, you’re exposed.
Some of the most common gaps I see include:
- No structured probation process with documented reviews
- Performance concerns raised verbally but never recorded
- Managers giving vague feedback rather than having direct, documented conversations
- Employees being dismissed suddenly when the issue was never formally flagged
- Inconsistent treatment, where different people are handled differently for similar behaviour
Any one of these could undermine your position at a tribunal.
The costs go well beyond a payout
When business owners think about the cost of getting a dismissal wrong, they tend to focus on the compensation figure. But the real cost is usually much broader than that.
There’s the management time involved in preparing for and attending hearings. Hours and hours that your senior people could be spending on the business. There are legal fees. There’s the stress it puts on your managers and the wider team.
Then there’s the knock-on effect on morale. When remaining staff see a dismissal handled badly, it affects how they feel about working for you. It can make it harder to hold on to good people, and harder to attract new ones.
I’ve also seen cases where employers end up settling claims they believe were perfectly reasonable, simply because they didn’t have the paperwork to back up their position. That’s a frustrating place to be, and it’s entirely avoidable.
Practical steps you should be taking now
The good news is that none of this requires a massive overhaul. It requires attention to the basics.
Start by looking at your employment contracts. Do your probation clauses reflect the new six-month qualifying period? Are they clear about what happens during and at the end of probation?
Then look at your disciplinary and grievance procedures. When were they last reviewed? Do they actually reflect how things work in your business, or are they a document that sits in a drawer?
You also need to consider how your managers handle performance issues. Are they documenting concerns as they arise? Are probation reviews actually taking place, or are they being skipped because everyone’s busy? Is feedback being recorded in writing, or is it all verbal?
These are the things a tribunal will look at. Not whether your decision was right, but whether the process leading up to it was fair and well documented.
If you’re providing HR consultancy services in Ipswich or anywhere else, the advice is the same: the first six months of employment now carry far more weight. Anyone you bring on from 1 July 2026 needs to be managed with that in mind from day one.
Questions worth asking yourself
Before you move on with your day, it’s worth sitting with a few of these:
- Could your managers explain what a fair dismissal process looks like if you asked them right now?
- Do you have written records of every performance conversation, warning, or probation review from the last 12 months?
- If a new hire wasn’t working out after four months, would you know exactly what steps to follow?
- Are all your employees treated consistently when similar issues arise, or does it depend on the manager?
If you’re not confident in your answers, now is the time to act. Not after a claim lands on your desk.
Getting ahead of this before it becomes a problem
A good HR consultant looks at your dismissal process before you need to use it. That means reviewing your documentation, your investigation steps, and your decision-making to spot the weak points before they’re tested under pressure.
If you’re already dealing with a difficult situation, having the right support means you can handle it properly without making things worse.
As an outsourced HR consultant in Ipswich, I work with business owners to get these foundations in place. Whether you’ve recently let someone go and want to check your process was sound, or you’re planning a dismissal and want to do it properly, I’m happy to have a conversation.
Get in touch and we’ll have an honest chat about where you stand and what needs to happen next.
