Employment Rights Bill u-turn on day one unfair dismissal rights

On 27 November the Government made a significant U-turn on day one rights to unfair dismissal. This means that although unfair dismissal reform remains a cornerstone of the Bill, employees will now earn unfair dismissal rights after 6 months of service rather than on day one as had been originally proposed. It is a move that will be generally welcomed by employers. With Employment Tribunals struggling to keep up with demand, and some claims being listed for 2028, it may also relieve some of the anticipated burden on them.

What else is changing?

Government also noted that alongside this six-month qualifying period compensation for unfair dismissal will be “lifted”. Currently, compensation is limited to the lower of either 52 weeks’ pay before tax or the statutory cap which is currently £118,223. This statutory cap is raised every April in line with inflation. What “lifted” means is currently unclear, we expect to be given more detail when the amended text of the Bill is released, hopefully in advance of the next Commons discussion scheduled for 8 December. At this stage, we anticipate that lifted means that the 52-week cap will be abolished leaving the statutory cap in place, rather than abolishing both caps entirely or raising the financial value of the caps.

We are expecting the light touch initial period of employment process to be removed from the Bill, as it was tied to that day one right to unfair dismissal.

The current government will also make it harder for future governments to change the duration of qualifying service for unfair dismissal rights. It has said that this new unfair dismissal qualifying period will only be variable by primary legislation. Over the years governments have often used statutory instruments to either increase or decrease the length of service needed depending on their political perspectives. Going forward changes to these new rules will be more difficult and take more time to implement.

There have been reports that when the Commons meet, Angela Rayner is set to put forward an amendment to the implementation roadmap. At the moment, changes to unfair dismissal rights are due to be brought into force in 2027. Given this will now be simple reduction in length of service Rayner will argue it is easier to implement without a need for consultation, so should be in force in 2026.

Finally, government has been confirmed that the day one rights to paternity leave and statutory sick pay are unchanged and will still be implemented as planned.

What happens next in the Employment Rights Bill?

The Bill returns to the Commons on 8 December. At this session, the Commons could make further U-turns and agree to the other Lords amendments around Trade Unions and zero hours workers. Although this is unlikely if they did the Bill could then be sent for Royal Assent. It seems most likely that the Commons will reject the other amendments and send the Bill back to the Lords again.

Government will be hoping this unfair dismissal concession will be enough to encourage the Lords to drop their remaining amendments and pass the Bill. If the Lords do not, then we will still be in a game of parliamentary ping-pong and the Bill will head back to the Commons again. With the first implementation dates of April 2026 looming, government needs this Bill to start making progress.

Employment Rights Bill Consultations

Government has already launched four consultations about how to implement parts of the Bill. Last week Business Secretary, Peter Kyle, also told the CBI conference that the remaining consultations would take place after it has passed into law. He asked businesses to engage with his department, and make their voices heard, to ensure that the government get implementing legislation right. Could this mean the government are open to more aspects of the Bill being watered down through consultation? If the Bill is now passed swiftly, we might expect to see these consultations launched early next year. In the meantime, you can find more information about current consultations on our Insights page.

Your to do list as an employer

Robust policies and procedures for both recruitment and probation will remain essential even with this amendment to the Bill.

So, our guidance for preparations remains the same:

• Audit your recruitment process.
• Review your terminations within the first two years and exit interviews to identify any trends you can feed back into your recruitment process.
• Plan to update recruitment processes, procedures and policies.
• Plan for manager training as meeting timescales will be critical to avoid probation reviews slipping.
• Ensure your HRIS system is ready to track probation period end dates.
• Engage with the current and future consultations about the Bill.

Please get in touch with the employment team if you would like advice on anything in this article, or any other employment law matters.