Day One Unfair Dismissal Rights Dropped

David Reid
Director
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After weeks of parliamentary “ping-pong” over the Employment Rights Bill between the House of Commons and the House of Lords, the Government has confirmed a major change to its original proposals. The plan to give employees the right to claim unfair dismissal from day one of employment has been dropped. Instead, the qualifying period will be reduced from the current two years to six months of continuous service before an employee can bring an “ordinary” unfair dismissal claim at the Employment Tribunal.

This shift marks a significant departure from the Government’s earlier commitment outlined in its manifesto to “Make Work Pay”, which promised day-one “ordinary” unfair dismissal rights. It comes after strong opposition from business groups and employers concerned about its potential to undermine probationary periods and deter recruitment. There were also concerns that introducing day-one rights would add further pressure to an Employment Tribunal system already dealing with substantial backlogs.

What is Unfair Dismissal?

Unfair dismissal occurs when an employer ends an employee’s contract without a fair reason or without following a fair and reasonable process. Fair reasons include:-

• Capability or performance issues
• Conduct
• Redundancy
• Breach of a statutory duty or restriction
• Some other substantial reason

Currently, employees need two years’ service to qualify for ordinary unfair dismissal rights. Under the new proposal, this will reduce to six months. Day-one protections will still apply for automatically unfair reasons, such as whistleblowing, health and safety concerns, pregnancy, and discrimination under the Equality Act.

Labour’s Concessions

For employers, this compromise is welcome. While the qualifying period will shorten to six months, the Government has stepped back (in the face of resistance) from introducing day-one rights, which could have significantly increased litigation risk. The six-month threshold provides a more balanced approach, allowing businesses to maintain confidence in recruitment and manage performance during probation without the immediate risk of unfair dismissal claims.

Unfair Dismissal- Compensation

The Government also announced that the current cap on the compensatory award for unfair dismissal will be “lifted”. At present, unfair dismissal awards are limited to the lower of 52 weeks’ gross salary or £118,223.

What this means in practice is still unclear. However, informed sources suggest that the monetary cap on compensatory awards of £118,223 will remain, and the alternative (and usually lower) cap of 52 weeks’ pay will be removed.

Next Steps

We are closely monitoring the progress of the Employment Rights Bill through Parliament, and we shall continue to provide regular updates to clients on any notable developments. You can find our previous JEL Alerts on Employment Rights Bill matters here.

If you have any questions about how this change may affect you, or if we can provide support or assistance on any other employment law matter, please do not hesitate to contact a member of the team on 0141 331 5150.

Topics: Employment Rights Bill, Unfair Dismissal