Rethinking recruitment after the Employment Rights Act 2025 ('ERA 2025')

From 1 January 2027 the ERA 2025 will reduce the qualifying period for unfair dismissal claims from two years to six months and remove altogether the limit on compensation in 'ordinary' unfair dismissal claims.

Employers therefore need to make sure they are setting themselves up for success when recruiting new employees. In particular, fully exploring a candidate's suitability for the role and organisation before employment and during the first six months can help avoid the lengthy and costly procedures, disputes and settlements that may result from insufficiently rigorous recruitment processes. 

In this article we explore some of the steps that you can take to reduce the risks associated with dismissing a new hire along with some potential pitfalls you may face after January 2027.

Interview and test

Given the higher risks associated with dismissing staff in the future, you may want to carry out more extensive and robust interviews and to subject candidates to a greater degree of testing in technical and other skills. Remember that notes and data from these tests will be disclosable in the event of a dispute if, for example, a candidate argues that you did not offer them the role for discriminatory reasons. You should be able to clearly explain why you did not make an offer by reference to objective criteria.

If the role lends itself to a more hands-on demonstration of skills, such as a trial shift, consider whether the tasks you are asking the candidate to do could fall within the scope of the minimum wage regulations. This will particularly be the case for shifts in a 'live' environment where actual work is being carried out.

Due diligence

Even when you think you have identified the right candidate, it will be more important than ever to ensure that you completed important checks before committing to an offer. Fact checking CVs, following up on reference requests and speaking to personal referees (where possible) are steps that can be glossed over after interview, but can all provide valuable insights on the suitability of an employee that may otherwise only materialise sometime after employment has started.

Once you have made an offer of employment you may want to ask an employee to complete a health screening questionnaire covering relevant topics for that role. This can help identify any disabilities or other issues at an early stage that can then be addressed through reasonable adjustments. Whether or not you opt for a formal screening process, letting employees know that they can disclose any disabilities and discuss reasonable adjustments before they start work can help ensure that any equipment or adjustments are in place for day one. If adjustments are not in place from the outset it may be difficult to fully (and fairly) assess the employee's suitability for the role before the end of the six-month qualifying period.

Employees can now ask for flexible working arrangements from day one of employment. It may be worth exploring whether this may be an issue after the offer has been accepted to ensure that clear expectations are set and understood from both sides in advance of the individual starting work. 

The ERA 2025 will remove the qualifying period for unfair dismissal altogether where the reason for the dismissal is that the employee has a spent conviction.  The existence of a spent conviction will only be apparent if the role is one for which a standard or enhanced DBS check can legitimately be carried out. It will not appear on a basic check. You will still need to weigh up whether the existence of a spent conviction is a reason you might not want to appoint at all. If you discover the spent conviction after employment has started, and dismiss on that basis, you may not be able to establish a potentially fair reason to dismiss and the employee will have had unfair dismissal protection from day one of employment. Your risk assessment will be different if a conviction is unspent, but even then, you will want to reflect before deciding whether dismissal is the right course of action for your organisation.

Conditional offers and withdrawals

It is essential to have an employment contract signed by the start date of employment. However, there is often a period where an offer has been made and accepted (and a contract is therefore formed in law) but the written contract has not been signed and returned. It is therefore very important to ensure that any conditions that, if not satisfied, may result in the offer being withdrawn, are set out clearly in the offer letter.  In a recent case an employer was required to pay three months' notice pay to an individual after withdrawing a job offer before the employee started work. The offer had contained conditions, but the way these were drafted meant that the contract was already in place and the employee was entitled to receive proper notice of termination. 

Hit the ground running

A six-month period to assess suitability passes very quickly so enabling the employee to be fully immersed in the role from day one will help make the most of this time. We have written more about this here. It can also be helpful to introduce team members (e.g. in a social setting) before the new hire starts. However, avoid the temptation to start sending the new employee work tasks, or to invite them to work events before the start date in case they later argue that their employment actually commenced earlier than their official start date, meaning that they gained unfair dismissal protection earlier than you expected it.

Whilst these steps cannot ensure that every new hire works out, it will hopefully help you navigate some of the new and heightened risks arising from the ERA 2025. Please speak to a member of the employment team for more guidance on these and any related issues.

This article is authored by Libby Payne, partner in the UK employment team.