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Unfair dismissal in the workplace is a hot topic in The Employment Rights Bill how will it impact employers?

The Employment Rights Bill (the Bill) was introduced on 12 October 2024 and one of the proposed changes that particularly caught people’s attention was the seismic plan to abolish the two-year qualifying period to make unfair dismissal a ‘day-one‘ right.

Lauren Barchet and Suzanne Nulty consider what will this mean for employers and ask is there anything they need to be doing now?

Context

Since the right to claim unfair dismissal was first introduced by Labour over 50 years ago in 1971, there has always been a qualifying period of service needed to entitle an employee to this protection. The qualifying period has regularly fluctuated with changes of government; from 6 months, to one year, to two years.  

Employers will be aware that, currently, the general rule is that an employee must have two years’ continuous service in order to bring a claim for unfair dismissal. There are, of course, exceptions to this service requirement when a dismissal is because of specially protected ‘automatically unfair’ reasons (such as whistleblowing, trade union membership, or discrimination) where a claim can be brought irrespective of the individual’s length of service.

Under the government’s proposals, the qualifying period to bring an ‘ordinary’ unfair dismissal claim will be removed entirely so that they will be able to make a claim from ‘day one’.  

In its Next Steps to Make Work Pay policy paper (the Policy Paper) published alongside the Bill, Labour recognised the huge significance of this proposal and committed to “ensuring all stakeholders receive appropriate time to prepare for these changes ahead of their commencement” and that the unfair dismissal changes “will take effect no sooner than Autumn 2026” following consultation in 2025.

Probationary Periods – Cushioning the blow for employers?

Despite much publicity about the Bill proposing the use of probationary periods to reduce the impact of unfair dismissal becoming a ‘day one’ right, the phrase ‘probationary period’ is not specifically mentioned in the Bill. Instead, the Bill refers to ‘an initial period of employment’ (IPE) and provides that if an employee is dismissed during that initial period, there will be a light-touch process available to employers for most types of dismissal; and different (presumably also lighter-touch?) fairness / reasonableness tests in unfair dismissal employment tribunal cases. 

The Detail of the Bill’s proposals – What do we know and what are we waiting for?

It is fair to say that there is much crucial detail awaited which we will see when the consultation happens and the associated draft Regulations are published, so it is perhaps useful to summarise what basics are already specified in the Bill or covered in the Policy Paper, and what key details we are still waiting for.

First, the Bill is clear that the ‘day one’ right will not apply from when the employment contract begins ie when the employee accepts a job offer, but rather from the first day the employee actually starts work.

The Bill also specifies that relevant dismissals* which occur during the Initial Period of Employment (IPE) (or within three months of the IPE finishing if notice of dismissal was given during the IPE), will be subject to different reasonableness tests than those which apply to other ordinary unfair dismissal cases.

*Relevant dismissals are those for misconduct, capability, statutory ban or Some Other Substantial Reason related to the employee.

Redundancy dismissals will, therefore, not be affected by the alternative reasonableness tests and / or lighter-touch processes. Accordingly, all employees will be entitled to the same redundancy processes and protection as are currently available under the existing unfair dismissal regime, but from day one, which is clearly a very significant change given the financial and procedural rigours that employers have to navigate when undertaking redundancies.

These factors may make this redundancy aspect of the proposals one of those which is subject to particular scrutiny during the consultation and passage of the Bill through the parliamentary process.

The detail of what the different reasonableness tests will be for the relevant dismissals mentioned above, is not yet specified, either in the Bill or the accompanying Policy Paper and will be the subject of the forthcoming consultation, but the Policy Paper refers to a “proportionate” and “lighter-touch” process during what it terms the “initial statutory probation period”.

Similarly, the length of the IPE itself is also not specified, but the expectation is that the government’s stated preference – nine months - will be the IPO period proposed in the consultation.

The policy document also hints at the government’s likely proposal for the truncated fair dismissal process for IPE dismissals:

“As a starting point, the Government is inclined to suggest it should consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague). The Government will consult extensively, including on how it interacts with Acas’ Code of Practice on Disciplinary and Grievance procedures.”

Finally, the Policy Paper also indicates that consultation will include consideration of an alternative compensation regime for individuals dismissed during the IPE whereby they will receive less compensation than those who have successfully navigated that initial [9 month?] period; meaning there will be a two-tier level of compensation available for unfair dismissal.

 

Current use of probationary periods

Contractual probation periods have long been used by employers to determine an employee’s suitability for their role, but such periods currently have no statutory standing or significance. Probationary periods tend to be six months or less and have almost always been for lesser periods than the service requirements for an unfair dismissal claim (currently two years as stated above) so tend to be aligned with a “lighter touch” disciplinary or dismissal process in any event.  

Separate to the proposed changes, which will be some time off in any event, it is good practice for employers to review contractual and policy provisions relating to probationary periods and to ensure that appropriate probationary reviews are carried out at the right time and documented. This is likely to put employers in good stead for the managing statutory IPEs once they are introduced.

 

Tribunal Floodgates?

It has been reported that the government estimates that this change alone will entitle an additional 9 million employees to bring unfair dismissal claims, which, on one hand, it heralds as a potential victory for workers rights. On the other hand, in its Policy Paper, it recognises the “concerns from business” about additional litigation and costs etc arising from such a surge; as well as “unwelcome additional work for the tribunals system and for ACAS”. It’s answer, “to make clear [to employees] where bringing claims might be unsuccessful” does not seem to penetrate the significance of the anticipated rise. This will, no doubt, be an interesting and lively area of the debates that will follow.

Watch this space

The intricacies of the introduction of day one unfair dismissal rights are yet to be finalised and there are still questions surrounding how it will work in practice.

We will be continuing to monitor this critical development, so do keep an eye out for future publications in our ERB Series of Insights.

See our previous ERB Insights in this Series:

Overview: ERB What’s In What’s Out What’s Next  11 October

https://www.weightmans.com/media-centre/news/the-employment-rights-bill-2024-what-s-in-what-s-out-and-what-s-next/

ERB: Flexible Working: Further Flexion 21 October 2024

https://www.weightmans.com/media-centre/news/employment-right-bill-series-flexible-working-further-flexion/