Impact of employment law reforms next year need to be considered now - Paul Kelly

The early part of 2027 is expected to bring a raft of employment law reforms that will affect every business in the region. For many organisations, these reforms will also come at a time of increased pressure on costs, resources and day-to-day operations, making effective workforce management more important than ever.

The qualifying period for bringing an ordinary unfair dismissal claim will be reduced from two years to six months.

Any employee whose date of termination falls on or after that date will be able to claim unfair dismissal after just six months' continuous service, rather than the current two years.

This is a significant shift for employers and is expected to cause a rise in claims. Employers who have historically relied on the two-year qualifying period to manage underperforming or unsuitable new starters will need to adapt quickly.

In practice, it means reducing probationary periods, ensuring that performance concerns are documented and dealt with from the outset, and making sure that any decision to dismiss follows a fair process and is based on a recognised fair reason.

Currently, the compensatory award for unfair dismissal is capped at the lower of 52 weeks' pay or a statutory maximum, for dismissals where the date of termination falls on or after that date, that cap will be removed entirely.

The practical impact of this change should not be underestimated. It means that the financial exposure for an unfair dismissal that is handled badly could be substantially higher than before, particularly for longer-serving or higher-earning employees.

At present, employees must have two years' continuous service before they are entitled to request a written statement of the reasons for their dismissal, and from January this will be reduced to six months.

This means that employers will need to be prepared to articulate, in writing, the reason for any dismissal after six months' service. It reinforces the importance of keeping detailed records throughout the employment relationship and ensuring that the reason given for dismissal is one that can withstand scrutiny.

New rules will also make it automatically unfair to dismiss an employee for refusing to agree to a contractual variation, unless the employer can show the change was necessary to prevent serious financial difficulties and that all reasonable steps to reach agreement had been taken.

The reforms expected from early 2027 do not stop there and a number of further reforms are expected to come into force later in the year and beyond.

Two major changes expected are that workers on zero-hours and low-hours contracts will gain the right to a guaranteed-hours contract reflecting their normal working pattern and the current rule that triggers collective consultation obligations based on redundancies at a single establishment will require employers to aggregate proposed redundancies across all sites when assessing whether the consultation threshold is met.

With reforms of this scale, preparation is everything and businesses that act now will be the ones best placed to navigate the year ahead with confidence.

Paul Kelly is head of the employment team at law firm Blacks.