09/07/2026
The Employment Rights Act 2025 is bringing significant changes to unfair dismissal rights, with one of the most important changes for employers being the reduction in the qualifying period for ordinary unfair dismissal claims from two years to six months from 1 January 2027.
For charities and community organisations, this change is particularly relevant because many roles are funded through grants, contracts or short-term projects and are often offered on fixed-term contracts.
A common misconception is that a fixed-term contract simply “ends” when it reaches its expiry date. In employment law, the non-renewal of a fixed-term contract is treated as a dismissal. This has been the case for many years and will remain unchanged under the Employment Rights Act 2025.
Currently, an employee generally needs two years’ continuous service before they can bring an ordinary unfair dismissal claim. From January 2027, that qualifying period will reduce to six months.
This means that employees on longer fixed-term contracts may gain unfair dismissal protection much sooner than they do at present.
Many voluntary sector organisations employ staff on contracts linked to external funding. These might include:
Under the new rules, a worker employed on a 12-month project contract would typically pass the six-month qualifying period before the contract reaches its end date. If the contract is not renewed, the employee may have the right to challenge the dismissal if they believe it was unfair.
Importantly, this does not mean organisations cannot end fixed-term contracts. Where funding has ended, a project has concluded, or the work genuinely no longer exists, there may still be a fair reason for dismissal. However, employers may need to demonstrate that they acted reasonably and followed an appropriate process.
For many charities, the end of funding is a routine reality rather than an exceptional event. However, the fact that a role is externally funded does not remove an employer’s legal obligations.
Where a grant-funded project comes to an end, organisations should consider:
These considerations are already good employment practice, but the reduction in the unfair dismissal qualifying period means they may become increasingly important for fixed-term employees with more than six months’ service.
Many voluntary sector employees move between multiple fixed-term contracts with the same organisation as funding streams change or projects evolve.
Government guidance confirms that continuous service can accrue across fixed-term contracts, meaning organisations should not assume that a “new” contract resets employment rights.
This is particularly relevant for charities that regularly extend projects, secure continuation funding or move staff between programmes.
While the new unfair dismissal qualifying period does not take effect until January 2027, organisations may wish to start reviewing their practices now.
Areas to consider include:
For the voluntary sector, these changes are unlikely to prevent the use of fixed-term contracts. However, they do reinforce the importance of treating the end of a fixed-term contract as an employment process rather than simply an administrative end date.
