The Government has confirmed a significant shift in its approach to unfair dismissal rights. Originally, the Employment Rights Bill proposed granting employees the right to claim unfair dismissal from day one of employment. However, following extensive discussions with trade unions and business representatives, this proposal has been scaled back.
Under the revised plan, the qualifying period for ordinary unfair dismissal claims will be reduced from two years to six months, rather than being abolished entirely. Existing day-one protections, such as those against discrimination and automatically unfair dismissal remain unchanged.
In addition, the Department for Business and Trade has announced that the compensation cap for unfair dismissal claims will be lifted. Although details are still to be confirmed whether this means a full removal or a removal of just one of the two current caps. Currently, compensation is capped at the lower of 12 months’ salary or £118,223, so any change could have significant implications for employers and employees alike..
The Bill, which has faced delays due to parliamentary “ping pong” between the Commons and the Lords, is now expected to receive Royal Assent before Christmas 2025. Other reforms, such as day-one rights to statutory sick pay and paternity leave, are scheduled to take effect from April 2026, alongside the launch of the new Fair Work Agency.
What this means for employers
Employers should start preparing for these changes now. Key steps include:
- Review probation policies to ensure they align with the new six-month qualifying period.
- Update dismissal procedures to reflect the shorter timeframe for potential claims.
- Assess financial exposure in light of the anticipated removal or increase of the compensation cap.
- Train managers on fair performance management and documentation practices to mitigate risk.
Proactive planning will help businesses avoid costly disputes and maintain compliance as these reforms take effect.
For further advice on how these changes may impact your business, please contact Jessica Leslie on 0191 384 2441 or email jessica.leslie@swinburnemaddison.co.uk.
