A Bad Hire Just Got a Lot More Expensive

The Employment Rights Act 2025 has fundamentally rewritten the cost of a bad hire. For businesses making critical appointments, the stakes have never been higher and the case for getting it right first time has never been stronger.

As a headhunter who sees this all first hand, here’s my perspective on this…

The good ol’ days

There is a moment every hiring manager knows. It usually arrives around month three or four. The new appointment – the one who interviewed so well, who seemed to tick every box – is quietly not working out. The energy in the room shifts when they walk in. Decisions are delayed. The team starts working around them rather than with them.

In the old world, this was painful but manageable. You had time to course correct. The legal framework was forgiving enough that a parting of ways, while uncomfortable and expensive, was at least relatively straightforward. That world is now behind us.

The Employment Rights Act 2025 has fundamentally altered the calculus of hiring. It is the most sweeping overhaul of UK employment law in a generation and while much of the commentary has focused on what it means for employees, the implications for businesses making senior hires are profound and not yet fully understood.

What has actually changed?

The headline shift is the reduction of the unfair dismissal qualifying period from two years to six months, taking effect from January 2027. Where an employer previously had a substantial runway to assess a hire before the full weight of employment protection kicked in, that window has been cut dramatically. Six months is not long enough to know whether a senior leader is truly the right fit, but it will soon be long enough for them to have full unfair dismissal rights.

Key numbers:

• 6 months – new qualifying period for unfair dismissal (from Jan 2027)
• Uncapped – unfair dismissal compensation, with the previous £118,223 ceiling now removed entirely
• 180 days’ pay – new maximum protective award for collective redundancy consultation failures

But the change that should really focus minds is the removal of the cap on unfair dismissal compensation. Previously, awards were limited to 52 weeks’ salary or £118,223 – whichever was lower. That ceiling is gone. For a senior hire earning £150,000, £200,000 or more, a successful unfair dismissal claim could now expose a business to a liability with no upper limit. The risk is not theoretical. It is material.

Layer on top of this the strengthened protections for pregnant employees and those returning from family leave, the tightened fire and rehire rules, the expanded bereavement rights and the day-one entitlements to sick pay and paternity leave — and the full picture comes into view. Every hire now sits within a broader framework of statutory rights from day one, and employers need to plan, contract and manage accordingly.

This is not just a legal problem

The mistake many businesses will make is to treat the Employment Rights Act as a compliance issue – something to hand to HR and legal, to be managed with better probationary processes and tighter documentation. That response, while necessary, misses the point entirely.

The real lesson of this legislation is that the quality of the initial hiring decision matters more than it ever has before. Because the cost of unwinding a poor appointment has become so much higher, the imperative is to not make the poor appointment in the first place.

This sounds obvious. It isn’t. The pressures that lead to bad hires have not diminished, if anything, they are worse than ever. Hiring processes have never been longer or more involved. Too many rounds. Too many stakeholders. Decisions that should take weeks stretch into months, with candidates lost to competing offers along the way. And yet, paradoxically, all of that time and process doesn’t guarantee a better outcome. Referencing remains superficial. Cultural fit is still assessed in a formal room, in formal circumstances, where everyone is on their best behaviour. Committees reach consensus rather than conclusions. And the loudest voice – the candidate who presents with the most confidence – is still too often mistaken for the best one.

What good looks like

Getting a business-critical hire right – I mean genuinely right, not just right on paper – requires a level of rigour that most internal processes struggle to deliver. It means mapping the market properly, not just posting a role and waiting. It means assessing candidates against a carefully defined brief that reflects not just the technical requirements of the job, but the specific culture, stage and strategic context of the business. It means structured, competency-based interviewing (not the friendly chat that tells you whether you’d like to have a drink with someone!), but the deep questioning that reveals how they behave when things get hard.

It means thorough, properly conducted referencing – speaking to people who have managed the candidate, been managed by them and worked alongside them. It means psychometric assessment where appropriate. It means honest, transparent conversations about fit, expectation and risk – before the offer is made, not after.

Most critically, it means investing the time and rigour that genuinely business-critical hires deserve. These are not decisions to be rushed because the business needs the seat filled yesterday. And yet, under the pressure of day-to-day operations, that rush is exactly what happens.

Cue the specialist…

I know, I know, I am bound to say this but having spent the past 13 years doing this job, I MEAN it – this is where specialist executive search earns its place! A good search partner does not simply find you a list of names. They bring an independent perspective on the brief, often identifying where the written JD diverges from what the business needs. They conduct a thorough market map, reaching candidates who are not actively looking and who would never appear on an inbound response. They apply consistent, structured assessment across the shortlist. And they provide the honest counsel on candidates, on the process, on the market, on the market’s perception of your business – when internal teams, with their own politics and pressures, often can’t/don’t.

Critically, they are accountable. A retained search engagement is a partnership, with the headhunter’s reputation as much on the line as the clients. That skin in the game matters.

The fee for a specialist search engagement is, typically, a fraction first-year salary for the role. Set against the uncapped liability now associated with an unfair dismissal claim – let alone the broader operational cost of a hiring mistake – it is not a cost. It is risk management.

Whether you’re hiring top leadership talent or thinking about how the Employment Rights Act 2025 impacts your hiring plan, our team would be delighted to support you.

Katie Simpson works at the senior end of the global Corporate Affairs and Sustainability market across both agency (CEO, MD, Head of and Director) and in-house positions (Director of Corporate Affairs, Director of Communications, Director of Marketing and Communications, Head of External Affairs etc).

Hanson Search is a globally recognised, award-winning talent advisory and headhunting consultancy. Our expertise lies in building successful ventures worldwide through our recruitment, interim and executive search in communications, sustainability, public affairs and policy, digital marketing and sales