18 Aug 2026
By Albany HR.
Insight from an HR consultancy in Edinburgh and Glasgow on the rising risks of employee dismissal and what you can do to protect your business.
If you run a small business, you’ve probably had to let someone go at some point.
Maybe it went smoothly. Maybe you assumed it always would.
New employment law changes mean that assumption is no longer safe. The financial exposure from a poorly handled dismissal is about to increase to a large degree..
And the window in which employees can bring a claim against you is shrinking fast.
Here’s what you need to know and what to do about it.
Two major changes are coming into effect that directly affect how you manage people in your business.
First, the qualifying period for unfair dismissal is dropping from two years down to six months. Anyone you hire on or after 1 July 2026 will be eligible to bring an unfair dismissal claim much sooner than you might expect. That long runway you used to have for deciding whether a new hire was working out has been cut down to a great extent.
Second, from January 2027, the cap on compensation in most unfair dismissal cases will be removed entirely. Right now there’s a ceiling on what a tribunal can award; soon there won’t be one.
On top of these two shifts, the Fair Work Agency launched in April this year. It gives employees a new route to raise complaints and seek protection. The agency also has the power to audit your records and processes on its own initiative, without needing a complaint from a worker first.
For a long time, the two-year qualifying period gave smaller businesses breathing room. If someone wasn’t the right fit, you could part ways relatively informally without too much worry about a legal challenge.
That comfort zone is disappearing. With protection kicking in at six months, even someone who joined recently could question the fairness of their dismissal.
And because there’s no longer a cap on what a tribunal might award, the potential financial hit from getting it wrong has gone up considerably.
To be clear, you can still dismiss someone. Nobody is saying you can’t manage your team or make difficult decisions. However, you will need to demonstrate that you followed a fair process and acted reasonably.
Tribunals pay close attention to how you reached your decision, not just the decision itself.
The mistakes we see most often tend to fall into a few common areas.
A lack of a structured probation process is one of the biggest. If there’s no clear framework for reviewing a new employee’s performance during their first months, you’re left without evidence if things go wrong.
Inconsistent documentation is another. When concerns about someone’s performance or conduct aren’t recorded properly, or feedback is vague rather than specific, it becomes very difficult to show that you gave the employee a fair chance to improve.
There are other patterns that create risk too:
Any one of these gaps can undermine your position if a claim is made.
It’s easy to think of the risk purely in financial terms. And yes, the potential payout is now uncapped, so that’s a real concern.
However a badly handled dismissal carries other costs that are just as damaging.
Management time is one that catches people off guard. Preparing for a tribunal hearing, gathering evidence andattending the hearing itself absorbs hours and hours that you and your managers should be spending on running the business.
Then there’s the impact on the rest of your team. When a colleague is dismissed in a way that feels unfair or sudden, it affects morale. People start to wonder whether the same could happen to them. That uncertainty can lead to disengagement, or worse, good people choosing to leave.
Your reputation as an employer matters too. Word travels, particularly in smaller communities and industries. If people hear that your business handles dismissals poorly, it becomes harder to attract the calibre of candidates you need.
Some employers end up settling claims they believe were perfectly reasonable, simply because they don’t have the paperwork to back up their position. That’s a frustrating outcome that is entirely avoidable with the right processes in place.
The businesses most at risk from these changes tend to be the ones that have grown quickly and relied on informal ways of managing people. If that sounds like you, now is a good time to tighten things up.
Start by looking at your employment contracts. Do your probation clauses reflect how you actually manage new starters? Are they clear about what happens at the end of the probation period?
Then consider your disciplinary and grievance procedures. Are they up to date? Do your managers know how to follow them?
Here are some specific areas worth reviewing:
The first six months of employment deserve particular attention now. With the qualifying period dropping to six months for anyone hired from 1 July 2026, how you onboard and manage new employees during that initial period carries much more weight than it used to.
HR consultancy services in Edinburgh and Glasgow can help you review these areas in an orderly way, so you’re not left scrambling when an issue arises.
Before you move on with your day, it might be helpful to reflect on a few things:
If any of those gives you pause, it’s worth looking into sooner rather than later.
The best time to review your dismissal process is before you’re in a situation where it matters. Looking at your documentation, your investigation steps, and your decision-making now means you can identify weak spots while there’s still time to fix them.
If you’re already dealing with a difficult situation, having someone alongside you can help you handle it properly and avoid making things worse.
As an outsourced HR consultancy in Edinburgh and Glasgow, we work with small business owners to make sure their processes are solid and defensible.
If you’ve recently let someone go, or you’re thinking about it, please do get in touch. We’ll be honest with you about whether your process stands up, and what to do if it doesn’t.
Please get in touch and we can talk it through together.
