Employment Rights Act 2025 – what employers in the life sciences sector need to know about unfair dismissal changes
This article considers the key proposed changes to unfair dismissal which impact employers in the life sciences sector.
Limitation period
In October 2026, the limitation period for issuing an unfair dismissal claim is changing. Employees will have six months (increased from the current three months) to issue their claim. As a result, an increase in claims is expected, particularly if employees do not find alternative work quickly following dismissal.
Six month qualifying period
Although implementation is not until January 2027, any new employees hired in July 2026 will be covered by this rule when the new changes come into force.
This reform will significantly reduce the flexibility employers currently have when dealing with short‑service dismissals or applying a streamlined dismissal process for staff with under two years’ service – something frequently seen in practice.
Once an employee has six months’ service, any dismissal must be for one of the fair reasons set out in the Employment Rights Act 1996 (conduct, capability, redundancy, statutory restriction/illegality or ‘some other substantial reason’) and must follow a fair process. A failure on either limb will render the dismissal unfair, exposing the employer to liability.
Employers in the life sciences sector should be particularly mindful of this when undertaking short-term project work. Further, the sector frequently relies on extended placement students, research interns, and graduate programmes. These placements typically last between nine months to a year. Under the new changes, interns who meet the legal definition of an ’employee’ will automatically qualify for unfair dismissal protection after six months’ service. Employers should review how these programmes are structured and managed and be aware of how this change will affect these short-term employees. The use and management of appropriate fixed term contracts will be critical in managing this risk going forward.
Probationary periods
Probationary periods will be a particular pressure point following the change. Six‑month probationary periods are common, particularly for senior appointments. A key advantage of these has historically been the ability to dispense with a full performance management procedure and the reduced need to demonstrate a fair reason for dismissal (provided the reason is not discriminatory or on account of whistleblowing).
Under the new regime, if an employee with six months’ (or more) service fails probation, they will now be able to bring an unfair dismissal claim. Employers should therefore reassess the length and structure of their probationary periods and either move to a three month probationary period, or develop more rigorous checkpoints to address performance concerns before an employee acquires unfair dismissal rights.
Alongside this, employers should ensure they have robust recruitment processes to reduce the likelihood of relying on probation to correct hiring decisions.
This change is likely to result in many more unfair dismissal claims and may complicate probationary management, for example where employees seek to delay the end of probation to reach the six‑month threshold.
While the new qualifying period will require closer management and clearer communication with new starters in their first six months, it also offers an opportunity for employers to strengthen early performance management and address concerns from the outset. Employers should take steps to review their policies and procedures and ensure that managers understand the importance of, and are equipped to deal with, early performance management.
Uncapped compensation
In a successful unfair dismissal case, a claimant is entitled to:
- a basic award (calculated in the same way as a statutory redundancy payment); and
- a compensatory award, intended to reflect the employee’s actual financial losses arising from the dismissal.
As things stand, the compensatory award is subject to a statutory limit, set at the lower of 52 weeks’ gross pay or a statutory cap of £123,543 (increased annually).
From 1 January 2027, the statutory cap on compensation for ordinary unfair dismissal claims will be removed entirely. Tribunals will be able to award compensation reflecting the employee’s full financial loss, subject to established principles such as mitigation.
Whilst claimants will still have the obligation to mitigate their losses and search for alternative work, the move to uncapped compensation is likely to impact senior executives, who may be more minded to negotiate generous exit deals or pursue claims which may have been less attractive previously.
Key takeaways for life sciences employers
- The limitation period for claims to be issued in the Employment Tribunal is being extended to six months from October 2026.
- Unfair dismissal rights arise after six months from 1 January 2027 (and will cover employees who have been employed since July 2026).
- Short‑service dismissals become higher risk much earlier in employment.
- Interns and placement students working for over six months potentially qualify for unfair dismissal protection, so appropriate fixed term contracts and processes should be put in place.
- Probationary periods need reviewing – length, structure, and timing of check‑ins.
- Early performance management is essential to avoid issues after the six‑month point.
- Recruitment processes should be strengthened to reduce reliance on probation.