The end of day-one unfair dismissal rights

Following back and forth amendments between the Lords and Commons, on 27 November the Commons gave way and agreed that the Employment Rights Bill (ERB) would contain a six-month qualifying period for unfair dismissal rights. Day-one unfair dismissal rights, a cornerstone of Labour’s reforms and 2024 manifesto pledge, are no more. The Government’s reasoning was that giving way would break the deadlock and allow the ERB to progress.

Reaction has been mixed, with Paul Nowak of the TUC broadly approving, business definitely approving, but certain unions and Labour MPs unhappy about what they see as a sell-out and breach of a manifesto commitment. Sharon Graham of Unite commented that the ERB is a “shell of its former self”.

However, the broad consensus seems to be that this concession will allow the ERB to be completed before Christmas.

We have identified several of the key implications below:

• From a pragmatic perspective, a six-month qualifying period is easier to administer – day-one unfair dismissal rights involved tricky caveats on probationary periods;
• Employers should consider their approach to probationary periods so that probation is reviewed before the expiry of the six-month qualifying period;
• It is still a major change, reducing the qualifying period by 75%, and should be viewed in the context of the doubling of the statutory limitation period, from three to six months, along with the doubling of the ACAS Early Conciliation period to 12 weeks. The net effect is favourable to employees; 
• Although the change is pragmatic and welcome, it does represent a breach of a manifesto commitment and there are concerns about what other commitments will be reversed. It is too early to assess what features of the ERB might be seen as at risk; and
• It means that Labour’s original timetable is likely to be back on track.    

The government is also committed to ensuring the compensation cap on unfair dismissal is lifted. It is unclear from the most recent announcement whether the intention is to abolish the cap entirely (currently the lower of £118,223 or 52 weeks) or to remove the 52-week limit. In the January 2024 Green Paper, Labour did promise that that workers would receive “full compensation, without statutory limits” should their employer breach the law.

Six months will still be the shortest qualifying period since the late 1970s, and perhaps the thinking was that endless arguments over a possibly impractical provision stood in the way of implementing, at least on time, the rest of the ERB.

It remains to be seen whether this reversal will embolden those opposing the ERB as currently drafted and will therefore lead to further dilutions of other key provisions.