In a significant development late yesterday evening, the Government confirmed that it is abandoning its flagship proposal to introduce day-one unfair dismissal rights. Instead, the Employment Rights Bill (ERB) will instead proceed to introduce a six-month qualifying period for ordinary unfair dismissal claims.

Given how central day-one rights have been to the Government’s messaging around the Bill, this is an extraordinary political pivot, and clearly not one they have made lightly. But in substance, it is a welcome and pragmatic course correction, and one that reflects the serious concerns consistently expressed by employers, practitioners and stakeholders across the employment law community.

When the draft Bill was first published, the proposal to allow unfair dismissal claims from day one stood out as a dramatic intervention. The UK would have moved from having one of the longest qualifying periods globally (two years) to no qualifying period at all – a position almost entirely unmatched internationally.

However, early enthusiasm for the idea quickly collided with practical reality. For many organisations, particularly smaller employers, an immediate right to bring an unfair dismissal claim risked generating:

• Heightened recruitment risk (especially for probationary hires);
• Increased litigation exposure before employers had any meaningful opportunity to assess performance or fit;
• Greater procedural burden at a time when many HR and legal teams remain overstretched; and
• Knock-on effects within highly project-based sectors such as Film and TV and other creative industries, where short-term engagements are the norm

The Government now acknowledges, at least implicitly, that while increased protection for workers is a legitimate policy goal, day-one rights were simply too blunt an instrument.

The six-month qualifying period represents a more balanced approach. It offers earlier protection than the current two-year rule, while still giving employers a reasonable window to manage recruitment risk. For sectors reliant on short-term contracting, this landing point is likely to be very significant and much welcomed.

One of the more intriguing aspects of last night’s announcements is how the qualifying period will change. Rather than using existing powers in the Employment Rights Act 1996 to vary the qualifying period, the Government intends to legislate through the Employment Rights Bill itself.

In practical terms, this means the six-month rule will be embedded in primary legislation. Any future attempt to amend it will require Parliament to revisit the issue head-on. From the Government’s perspective, this is presumably an attempt to future proof the change and make reversing it much more difficult. Regardless, in an area of law that has often shifted with political winds, this approach may at least provide longer-term certainty and stability for both employers and workers.

Perhaps the most surprising element of the Government’s press release was a short but striking line: “the compensation cap will be lifted.”

What exactly this means remains unclear. It could represent one of two very different policy changes:

1. Removing the entire cap on unfair dismissal compensation, effectively aligning it with discrimination and whistleblowing claims, which are already uncapped.
2. Removing just one of the two existing caps (either the statutory upper limit or the one-year’s-salary limit), while leaving the other in place.

The first option would be a seriously drastic change so we assume it must be the second. Even that would mark a major shift and, as far as we’re aware, neither has previously been trailed publicly.  We’ll be watching closely for additional clarity on this, which we hope arrives soon.

The Employment Rights Bill has spent recent weeks caught in a parliamentary tug-of-war between the House of Commons and the House of Lords, with day-one unfair dismissal rights the central sticking point. The Government’s concession is clearly designed to unblock progress.

Other contentious provisions remain, but the day-one unfair dismissal rights issue was the major roadblock. With this removed, there is now a realistic prospect that the ERB may complete its passage before Parliament closes for Christmas.

After 18 months in which significant employment law reform has repeatedly been promised and repeatedly delayed, it is possible that the long-anticipated framework for a new employment law landscape may finally be within sight.

The detail is still emerging and all the key changes will be thrashed out further still in consultations yet to be launched. So there really isn’t a massive amount for employers to do just yet. However, those who are especially keen (!) could consider reviewing the following:

• Dismissal and probationary procedures ahead of an accelerated qualification threshold; and
• The length and usage of short-term and project-based engagements to assess the potential for additional challenge once the new qualifying periods are in place

We’ll continue to provide further updates as the Bill and its inevitable consultations progress. In the meantime, if you’d like to discuss, please do drop us a line.