Employment Rights Act: how unfair dismissal rights are changing for those on fixed-term contracts

Several legislative changes under the Employment Rights Bill are due to come into force over the next two years, including changes to unfair dismissal rights for employees.

From 1^st January 2027, the qualifying period for protection against unfair dismissal will be reduced, which will have a significant impact on employers who use fixed-term contracts.

In this blog, our employment law solicitors explain more about the changes to unfair dismissal rights, how these affect fixed-term contracts, and what this means for employers and employees.

What is a fixed-term contract?

A fixed-term contract is an employment agreement that is intended to end:

• On a specified date
• When a particular project has been completed; or
• When a specific event occurs.

Unlike permanent contracts, there is usually a need for an employer to recruit a FTC role, such as maternity cover, for one-off projects or seasonal work.

What is unfair dismissal?

Unfair dismissal is when your employer dismisses you from work without good reason, or if they have failed to follow the correct dismissal process.

Whilst it depends on each situation, an employee is usually considered fairly dismissed if:

• There was a fair reason; and
• The reason was sufficient to justify a dismissal; and
• The employer followed a proper and fair procedure.

If your employer does not do the above, an employee may have an unfair dismissal claim.

Can you claim unfair dismissal on a fixed-term contract?

Currently, employees must have been employed for at least two years before making an unfair dismissal claim (for employees who were in employment before 6^th April 2012, it’s one year’s service) unless their dismissal is classed as ‘automatically unfair,’ in which case there is no minimum period to make a claim. Because most fixed-term contracts are less than two years, these employees are unable to claim unfair dismissal.

At present, employers can allow a 12-month fixed-term contract (FTC) to end and decide not to renew it, with a relatively low risk of being subject to an unfair dismissal claim. This is because a non-renewal of an FTC already counts as (fair) dismissal.

From 1^st January 2027, this qualifying period for an employee to bring an unfair dismissal claim will change to six months under the Employment Rights Act 2025. But this wasn’t always the plan; the Labour Government originally proposed to give workers protection from unfair dismissal from day one of their employment. This was u-turned in 2025.

Labour’s U-turn on unfair dismissal rights

In 2024, the Labour Government proposed to give workers the right to claim unfair dismissal from day one of their employment, rather than requiring an employee to have two years’ service.

Labour proposed to ‘consult fully with businesses, workers, and civil society on how to put plans into practice before legislation was passed’, which included protection from unfair dismissal. However, following significant opposition in Parliament, the Government decided to reduce the time period to bring an unfair dismissal claim from two years to six months, which will become applicable to employees on fixed-term contracts.

How should employers prepare for the changes to unfair dismissal?

The changes to unfair dismissal rights affect everyone; however, there are particular implications for fixed-term contracts and how employers use them.

Employer checklist:

• Conduct an audit on personnel files to check which employees will reach six months’ service before or after 1^st January 2027.
• Review your non-renewal processes to ensure a fair procedure is implemented.
• Update templates and manager guidance to reflect the new risk profile and required steps.

Employers who advertise a FTC with the view to making it permanent should also think carefully about how they approach it. If a role is advertised and contracted as fixed-term from 1^st January 2027, there will be less protection once the qualifying period is reduced.

What’s the best way to manage the dismissal of a fixed-term contract employee?

If you have decided not to extend an employee’s fixed-term contract, there are several ways this can be handled to ensure best practice:

• Following a fair procedure
• Giving early notice in writing of concerns, which is dated
• Holding a meeting with the employee
• Offer the employee the chance to appeal the dismissal

What changes to unfair dismissal rights should employees be aware of?

There are several changes to unfair dismissal rights that employees should be aware of:

• The non-renewal of a fixed-term contract constitutes a dismissal in law; this means employers should follow fair procedures.
• Unrenewed contracts: depending on the circumstances, from 1^st January 2027, if your contract is not renewed, you may be able to challenge an unfair dismissal once six months’ service has been reached. If non-renewal is proposed, ask about next steps, including the process.
• Early renewals: ask your employer early about renewals, the reason the role may end and whether alternatives or extensions are being considered.
• End of contract information: if your contract does come to an end, revert to your contract so that you are aware of your notice period, final salary, holiday pay, and any contractual policies that may apply at the end of the contract.
• Raising concerns: if something feels unfair or inconsistent (for example, if other employees have had their contracts extended and you haven’t), seek advice early, as time limits for claims can have short limitation periods.

What if I am unfairly dismissed on or after 1^st January 2027?

If you are unfairly dismissed on or after 1^st January 2027 and you have worked for the company for six months, you will have the right to claim unfair dismissal at an employment tribunal.

From October 2026, time limits for making a claim to an employment tribunal will increase to six months.

How do I make a claim for unfair dismissal?

If you believe you have been treated unlawfully, you should contact ACAS. Once ACAS have been notified, you’ll have the opportunity to try and settle the dispute without going to a tribunal by using ACAS’ ‘early conciliation’ service.

If, however, the dispute isn’t settled, ACAS will send an early conciliation certificate, the details of which you need to have before you can issue an employment tribunal claim, where you will have at least one month to settle the claim at an employment tribunal.

Employment tribunal claims are time-restricted (usually three months minus one day).

Contact our unfair dismissal solicitors

If you’re unsure how changes to the Employment Rights Act 2025 will affect you as an employee or an employer, or you need general employment law advice, our employment solicitors are here to help. Call us on 0117 325 2929 or fill in our online enquiry form.