The UK Government has revealed a major change in its approach to unfair dismissal rights under the upcoming Employment Rights Bill.
The original proposal was set to allow all workers the right to claim unfair dismissal from the first day of employment, but this has now been withdrawn.
It planned to abolish the two-year qualifying period and conduct a statutory probationary period that would give employers some protection during the early months of employment.
However, employers and the House of Lords raised concerns that the proposal may discourage hiring and questioned its practical impact, particularly on small businesses.
As a result, the Government announced their new plans to introduce a more balanced approach that reduces litigation risk while still offering employee protection.
Our Employment Law expert, Kristie Willis, explains what it is expected the Bill will bring and how employers are affected.
What changes will be introduced under the new Employment Rights Bill?
The revised proposal is expected to pass through Parliament shortly and take effect in April 2026.
However, an amendment introduced at the same time to remove the cap on unfair dismissal awards has been rejected by the House of Lords, causing the bill to be returned to the House of Commons.
The Bill is set to introduce several changes, including:
- A new six-month qualifying period for general unfair dismissal claims
- No statutory probationary period
- Existing day-one protections will remain the same, such as discrimination, whistleblowing and automatic unfair dismissal claims.
- The current proposal for the removal of the unfair dismissal compensation cap has been rejected by the House of Lords in favour of a requirement for the government to review the cap. We are now awaiting the House of Commons’ response to this, although it is expected to pass.
What does this mean for employers?
Although the removal of the proposed day-one protection will bring relief to many businesses, the shorter qualifying period will still require employers to adjust their hiring and management practices.
With only a six-month window before unfair dismissal rights apply, employers have reduced time to assess new employees’ performance and make informed decisions on termination.
The limited qualifying period means employers must strengthen their recruitment processes and hold regular, well-documented probationary reviews to assess performance.
If there are any performance concerns, these issues should be addressed early and clearly recorded to justify any decisions made in the first six months.
It is important to consider that even if employees cannot pursue an unfair dismissal claim in the first six months, in certain circumstances, they can still pursue automatic unfair dismissal claims and discrimination claims.
A formal midpoint review at three months, followed by a decisive assessment at five months, can help ensure employers have adequate time to act before the qualifying period ends.
The potential removal of the cap or possibly one element of it, may open employers up to the risk of larger awards and may make it more appealing for higher earners to pursue claims in the Employment Tribunal.
With the upcoming reforms, employers and businesses must stay compliant and update their contracts and onboarding processes.
Employers should be proactive in their assessment of new employees and if you are unsure about how the new reforms affect you, seeking legal advice is essential.
How will the Employment Rights Bill affect employers?
The Employment Rights Bill is set to introduce a range of reforms, including day-one paternity rights and whistleblowing protections relating to sexual harassment.
Employers must review their current policies and risk assessments to ensure they remain compliant once the legislation takes effect.
Our expert team can help you update your current procedures and create a clear plan that protects your employees and business.
For tailored advice on how the upcoming Employment Rights Bill will affect you, contact our employment law team today.