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ARTICLE · 08 JULY 2026

The Employment Rights Act 2025 And Fixed Term Contracts

Lewis Silkin
Lewis Silkin
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Lewis Silkin

Lewis Silkin

Joint managing partners: Jo Farmer, Richard Miskella International offices: Dublin, Hong Kong...

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The UK government's plan to remove the cap on unfair dismissal compensation and reduce the qualifying period from two years to six months will fundamentally reshape how employers use fixed-term contracts. These changes, effective January 2027, mean that employees on fixed-term contracts of six months or more will gain significant new protections, requiring employers to identify fair reasons and follow proper procedures when contracts expire without renewal.

United KingdomEmployment and HR
Colin Leckey
Colin Leckey
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Upcoming changes will have significant implications for employers’ use of fixed-term contracts. What should they be doing now?

Removing the cap on unfair dismissal compensation will be consequential; when combined with reducing the unfair dismissal qualifying period, from two years to six months, it will be of even greater significance. With these plans, the government has pulled the pin on a grenade tossed into the workplace. The explosion is expected shortly after 1 January 2027 when both changes are due to come into effect. Employers are starting to plan for the blast, but the shock waves will travel in many directions. One under-appreciated effect will be the impact on fixed-term contracts and employers should start considering action on these now.

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