Employment Rights Bill: Key update on unfair dismissal

What’s changing?

When the Employment Rights Bill (ERB) was first introduced on 10 October 2024, the day one right to unfair dismissal was one of the key and most debated aspects of the new laws, forming a central plank of what the Government had promised to introduce.  In just over a year down the line, the Government has, in the face of House of Lords challenge, changed their stance on the day one right to unfair dismissal.  Instead, they have tabled amendments to the Bill to reduce the qualifying period to six months’ continuous service, rather than the current two years.

This “workable package” can be considered to be a balanced approach as it aligns with a fairly typical probation period of six months, still giving employers an opportunity to assess the performance of a new employee, while greatly reducing the length of time an employee needs to be in post before acquiring the fundamental employment right to not be dismissed without a good reason and fair process.  

It could be argued that the switch to a more straightforward 6-month period is more favourable to employees than the somewhat complicated 9-month initial period of employment originally proposed, which, in many circumstances, seemed likely to render unfair dismissal rights a day-one right in name only.

Until employers modify their processes and mindset to assess new joiners fully and properly within a much shorter window, it is likely that both employers and tribunals will see an increase in claims from employees when the reduced service requirement is introduced.

The Government has suggested that the qualifying period will only be varied by primary legislation, and the existing day one protections against discrimination and automatically unfair grounds for dismissal will remain.

In addition, it is important to note that the day one right to sick pay and parental leave are still set to go ahead, and changes will be in effect in April 2026.  The Government has also announced that it will be launching the Fair Work Agency, which is discussed in more detail in our earlier article here.

Interestingly, aside from the changes set out above, the Government has said that the statutory compensation cap will be “lifted” but has not provided further details, leaving room for much speculation and concern.  At present, the cap is limited to receiving one year’s gross salary or no more than £118,223 if the dismissal took place on or after 6 April 2025.  ‘Lifting the cap’ could mean that if a claimant is successful in a tribunal claim, they could receive unlimited compensation, but until that is confirmed, we remain sceptical that this is the actual intention.

Next steps

• Prepare for changes coming in April 2026.  Day one rights for sick pay and paternity leave may require payroll and policy changes.
• Monitor progress.  Keep a look out for further updates and consultations as the ERB progresses – we suspect that the Government may continue to experience challenges in relation to some of the proposals, and what we ultimately get may not fully align, in a number of areas, with the aspirations set out in the draft ERB last year.

Contact a member of our Employment team if you wish to discuss the this update in further detail.