16 Aug Dismissing staff is about to cost you a lot more
Guidance from an HR consultant in Wychavon on what’s changing around unfair dismissal and what you need to do before it catches you out.
I’m speaking to more business owners right now who are worried about letting people go.
That worry is well placed. The rules around dismissal are shifting, and the financial exposure for getting it wrong is about to increase dramatically.
Most of the businesses I work with have relied on informal approaches for years. That’s worked up to now, but it won’t protect you going forward.
Here’s what you need to know and what to do about it.
What I’m seeing with clients right now
A lot of the businesses I support have grown quickly. They’ve hired people based on gut feeling, managed performance through casual conversations, and dealt with problems as they’ve come up.
That approach has been workable because, until now, employees needed two years of service before they could bring an unfair dismissal claim. That gave you a long window to figure out whether someone was right for the role.
From January 2027, that window shrinks to six months. Anyone you hire on or after 1 July 2026 will gain unfair dismissal protection much sooner than you’re used to.
And there’s another change landing at the same time. The cap on compensation for unfair dismissal is being removed entirely. Right now, there’s a limit on what a tribunal can award. From January 2027, that limit disappears.
So the combination is stark: more people can claim, and the potential payout is unlimited.
The Fair Work Agency adds another layer
The Fair Work Agency launched in April this year. It gives employees a new route to raise complaints and seek protection.
But it also has the power to audit your records and processes proactively. It doesn’t need to wait for a complaint from one of your staff before it steps in. If your documentation is patchy or your procedures are informal, that’s a risk even without a specific dispute.
Why the way you dismiss matters more than the decision itself
You can still dismiss someone. Nothing in these changes prevents you from making that call when it’s the right one.
What changes is how much scrutiny your process will face. Tribunals don’t just ask whether the dismissal was justified. They look closely at the steps you followed to reach that decision.
Did you raise the issue formally before taking action? Was the employee given a proper chance to improve? Did you keep written records of meetings and conversations? Were similar situations handled consistently across your team?
If the answer to any of those is no, your position becomes much harder to defend.
Some of the most common gaps I see include:
- Probation periods that exist on paper but aren’t actually reviewed or managed
- Performance concerns raised verbally but never documented
- Employees dismissed suddenly when no formal process was followed beforehand
- Inconsistent treatment, where one person is given warnings and another is let go immediately for similar behaviour
- Managers acting on frustration rather than following a clear procedure
Every one of those gaps creates an opening for a claim.
The costs you haven’t thought about
When most business owners think about the cost of a tribunal, they think about the payout. But the financial award is only part of it.
There’s the legal fees you’ll incur defending yourself. There’s the management time lost to gathering evidence, preparing statements, and attending hearings. That time comes directly out of running your business.
Then there’s the impact on the rest of your team. Morale drops when people see a colleague dismissed badly. Your remaining staff start to wonder whether the same could happen to them. That affects retention, and it affects how hard people are willing to work.
Your reputation takes a hit too. Word gets around, especially in smaller communities. If you’re known for handling people poorly, recruiting good staff becomes harder.
I’ve also seen cases where business owners end up settling claims they believe were fair, simply because they didn’t have the paperwork to back up their decision. That’s an expensive lesson.
What to do before these changes take effect
The businesses most at risk are usually the ones that have grown without putting formal HR processes in place. If that sounds like you, now is the time to act.
Start by looking at your employment contracts. Do your probation clauses reflect how you actually manage new starters? Are the terms clear about what happens during and at the end of probation?
Next, look at your disciplinary and grievance procedures. Are they written down? Do your managers know how to follow them? Have they ever been used properly, or do issues get handled off the record?
You should also check whether probation reviews are genuinely happening. Not just scheduled, but actually carried out with documented feedback and clear expectations.
Finally, think about how your managers give feedback and record warnings. If there’s no written trail, there’s no evidence. And without evidence, you can’t defend a dismissal.
The first six months of employment now carry far more weight for anyone joining your business from 1 July 2026 onwards. How you manage that period will directly affect your exposure to claims.
Through HR consultancy services in Wychavon, I work with business owners to review all of this before a problem arises. It’s far cheaper and less stressful to get your processes right now than to try to fix them after a claim has been made.
Ask yourself these questions
Before you move on from this article, spend a moment thinking about where your business stands:
- If you dismissed someone tomorrow, could you produce written evidence of the steps you followed?
- Do your managers know the difference between an informal chat and a formal performance conversation?
- Are your employment contracts up to date, particularly around probation terms?
- Have you treated similar situations consistently across different employees?
- Would your process hold up if someone challenged it at a tribunal?
If you’re unsure about any of those, that’s a sign you need to take action.
Get your process checked before you need it
The best time to review your dismissal process is before you’re in a situation where it matters. I look at your documentation, your investigation steps, and how decisions are being made, so we can identify weak spots before they become problems.
If you’re already dealing with a difficult situation, I can help you handle it properly and avoid making things worse.
As an outsourced HR consultant in Wychavon, I work with small businesses just like yours to make sure you’re protected.
If you’ve recently let someone go, or you’re thinking about it, get in touch. I’ll tell you straight whether your process would stand up to scrutiny, and what to change if it wouldn’t.
You can call me on 01386 751740 or email kirsten@cluerhr.co.uk to arrange a conversation
