Employment Rights Bill: ‘day one’ rights to claim unfair dismissal dropped

Currently, only employees with two years’ service by the date of termination of their employment generally have the right to claim unfair dismissal, though protections against certain types of dismissal, such as dismissal for whistleblowing, kick-in earlier.

With its landmark Employment Rights Bill (ERB), the government had planned to scrap the two-year qualifying period associated with unfair dismissal protection. It proposed to replace this with a ‘day one’ right to such protection, which was to be coupled with a statutory probationary period. However, the plans met with significant opposition from employers and received pushback from UK lawmakers in the House of Lords, leading to a delay in the ERB being finalised.

In an effort to overcome the legislative impasse, the government convened a meeting of business representatives and trade union representatives and has now announced that a compromise has been reached. While the government has stepped back from its plans to introduce ‘day one’ protections against unfair dismissal, it said the current two-year qualifying period for unfair dismissal rights will be reduced to six months. The plans to impose a statutory probationary period have been scrapped.

Read more on UK employment law reforms 

• Employment Rights Bill: the timeline from autumn 2025 onwards
• Employment Rights Bill to bring once-in-a-generation change for UK employers
• 'Significant’ changes to employment law in Northern Ireland move closer 

Employment law experts Jon Fisher and Anne Sammon of Pinsent Masons said the change puts the emphasis on employers to review their recruitment processes and increase manager training to improve how they manage underperformance of new joiners during their probationary period.

Fisher said: “The revised proposal is nowhere near as revolutionary as the original one. The qualifying period has fluctuated between six months and two years ever since the right not to be unfairly dismissed was introduced, although it has not been as low as six months since the late 1970s.”

“This proposal is much simpler and will be easier for employers to prepare for. The emphasis will still be on ensuring that there are effective probation periods to ensure that any issues with an employee are dealt with during the first six months, but employers will be able to determine their own probationary arrangements,” he said.

Sammon added: “Employers should review their recruitment processes with a view to making them more robust ahead of these changes taking effect, to ensure only the right people for the organisation progress beyond probationary periods.”

“Currently, it is quite common to see examples where underperforming new joiners proceed past their probation period before proper efforts are taken to manage improvements in performance. In practice, employers should look to provide managers with more training to tackle issues earlier in the process. In tandem with this, unconscious bias training should also be provided to managers to mitigate against the risk that their interventions on performance lead to discrimination claims,” she said.

In its statement, the government said that the current compensation cap that applies to unfair dismissal claims “will be lifted”.

Currently for ordinary unfair dismissal there is a cap on the compensatory award of a year’s pay or £118,223, whichever is lower. The cap does not apply to some automatically unfair dismissals, such as for whistleblowing, or to discrimination claims.

“The reference to the compensation cap being ‘lifted’ somewhat tempers the good news for employers,” Fisher said. “It is unclear whether ‘lifted’ means ‘increased’ or ‘scrapped’, although there are credible rumours that this simply means removing the one year’s pay element of the cap but retaining the overall cap of £118,223, which is subject to annual increases. In Labour’s employment rights ‘green paper’ – a precursor to the ERB it introduced to parliament after winning the 2024 general election – the party had proposed the removal of statutory limits to what employees could claim.”

“Either way, one silver lining may be that this move might reduce the incentive for employees to try to circumvent the cap by adding spurious discrimination or whistleblowing claims, reducing the costs of dealing with tribunal claims,” he said.

According to Sammon, even the revised proposals are likely to spur more claims to be raised before employment tribunals, which she said would only exacerbate current delays in resolving disputes.

“This reduction of the qualifying period for raising unfair dismissal claims is likely to result in more claims being brought, which would exacerbate the current tribunal backlog,” Sammon said. “In one case we received from a client last week, the hearing has been listed for November 2028, meaning it may be three years before there is a resolution to the dispute. This is not good for anyone involved in the tribunal system, adds cost for employers, and is not in the interests of justice.”

Sammon said greater investment in the tribunal system is needed to address the current problems.

“Thought needs to be given to raising the bar to prevent spurious claims of unfair dismissal or of unlawful deductions from wages from being heard at all – and to whether technology such as AI could help judges review documents and streamline procedures,” she said.

Fisher said he expects the concessions made by the government to now smooth the passage of the ERB through the Lords. A remaining stumbling block, he said, is likely to be the proposal to scrap the turnout requirement for strike ballots, but he described the day one unfair dismissal right as “the primary objection business had” to the proposals.

Sammon said: “While there are other aspects of the ERB that employers may not be happy to see implemented, a big concern we’ve heard from clients has been the time it has taken for this legislation to pass and the uncertainty this has caused over what the world of work will look like in six- or 12-months’ time. This has most definitely had an impact on decisions around, and investment in, resourcing, so the sooner there is clarity around the finalised legislation the better that will be for employers and employees alike.”

The government has confirmed that provisions that provide for ‘day one’ rights to sick pay and paternity leave are being retained in the ERB. The Bill is next due to be considered by MPs on 8 December, where it is expected that amendments giving effect to the changes the government has announced will be put back to the House of Lords for its approval.