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71% of SMEs plan to act sooner on dismissal decisions, IRIS finds

The research also showed 63% of employees said they were more likely to challenge a dismissal under the new six-month rule. 

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71% of SMEs plan to act sooner on dismissal decisions, IRIS finds
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Research from IRIS Software Group found 71% of small and medium-sized enterprise (SME) HR leaders said they would likely let go of new hires before six months if there were concerns. 

This comes as the Employment Rights Act 2025 will lower the qualifying period for unfair dismissal claims from two years to six months from 1st January 2027. 

The compensation cap will also be removed, increasing the financial risk for employers.

HR leaders said they had dismissed an average of two employees with between six and 24 months’ service over the past three years. 

The main reasons were performance or capability concerns, misconduct, attendance or sickness, not meeting targets, and breakdowns in working relationships.

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A separate IRIS poll of 500 SME employees found 19% had been dismissed or made redundant between six months and two years into a role. 

Of those, 73% felt the decision was unfair or unjustified, but only 20% raised a claim. 

17% said they could not claim because they had not reached two years’ service.

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The research also showed 63% of employees said they were more likely to challenge a dismissal under the new six-month rule. 

Two in five SMEs said they had defended an unfair dismissal claim in the past three years, with an average cost of £22,200. 

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Nearly a quarter said cases cost between £25,000 and £49,999, and 8% faced costs up to £99,999.

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Stephanie Coward, managing director, HCM at IRIS Software Group, said: “What’s striking is that many of these situations already exist – employees feeling decisions are unfair, but not having the ability to challenge them.

“These changes don’t necessarily create new risk, but they do make existing issues far more visible and actionable for employees. 

“The first six months of employment have never mattered more — not just in terms of risk, and as an opportunity to get the employment relationship right from the start.”

IRIS found 47% of HR leaders said the changes would improve fairness but increase business risk, while 30% believed they would improve fairness without major disruption. 

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Over half said the changes would make employers more risk-averse in hiring. 

Three quarters said they would become more cautious about candidates with limited references or patchy employment histories, and the same proportion planned to introduce more thorough screening.

36% said the changes would drive improvements in management standards, focusing on documentation, earlier performance checkpoints and structured processes within the first six months.

IRIS found 38% of SMEs still relied on email trails to document probation performance and dismissal decisions, 32% used paper files and 29% used spreadsheets. 

A third said they planned to invest in HR software as a result, with a further 39% already having systems in place or planning investment.

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Coward added: “There’s a clear tension in the data. Employers recognise the intent behind these changes – to improve fairness – but many plan to respond by accelerating firing decisions and becoming more cautious in who they hire.

“The risk is that probation becomes more about early risk management.  

“The organisations that come out ahead on this will be those treating the first six months as a structured, evidence-led programme, not an afterthought.”

He said: “That’s where having the right systems in place becomes critical. It’s no longer enough to rely on informal conversations or fragmented records – employers need a clear, consistent view of performance, decisions and supporting evidence from day one.

“The organisations that get this right won’t just be managing risk, they’ll be treating the first six months as a genuine opportunity to set people up to succeed. 

“That means being intentional from day one: clear expectations, structured check-ins, and the right systems to give managers the support and evidence they need to make good decisions.”

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