The UK government has abandoned one of the main points in the Employment Rights Bill, to give all workers the right to claim unfair dismissal from the first day of employment. This was one of the government's manifesto pledges and much has been written about the impact on employers of this becoming a day one right. In a statement published on 27 November, the government has indicated that it will instead reduce the qualifying period for claiming unfair dismissal from the current two years to a six month period.

Businesses welcome change

The day one right provision had led to concerns being raised by business groups who raised that it would discourage firms from hiring. In addition, this was one of the main issues seen as a block to the Employment Rights Bill receiving Royal Assent, with the House of Lords voting against the day one right and instead imposing an amendment suggesting a six month qualifying period. The government press release has indicated that this U-turn has arisen following a series of conversations between trade unions and business representatives.

Concerns over potential changes to compensation cap 

As part of the press release the government also added these words: 

“To further strengthen these protections, the Government has committed to ensure that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted.”  

It is not entirely clear what the government means by this - whether the current cap will be removed or whether it will simply be raised. Therefore, while employers are likely to welcome the change on unfair dismissal being a day one right, they will be concerned about what the lifting of the compensation cap will mean. Currently, compensation for most unfair dismissal claims is limited to 52 weeks gross pay or the statutory cap (currently £118,223), whichever is lower. Any change to the compensation could significantly impact the financial risk of dismissing an individual, particularly for more senior employees.

The timeline

The change to the unfair dismissal regime was due to be implemented in 2027. It is not clear whether this will remain the timeline, but employers should, in any event be reviewing their recruitment and probationary period processes and procedures.