Workforce matters The Employment Rights Bill: What will day one protection against unfair dismissal mean for businesses?

What is changing?

At present, employees must have worked with their employer for two continuous years to bring a claim for unfair dismissal, except for in cases of automatic unfair dismissal such as whistleblowing and pregnancy. The length of this qualifying period has shifted over the years; since the right to claim unfair dismissal became law in 1971, it has ranged in length between six months and two years.

As it stands, the Employment Rights Bill completely removes the qualifying period for protection against ‘ordinary’ unfair dismissal for the first time. Employees will therefore be able to bring an unfair dismissal claim to a tribunal from the first day of employment.

The introduction of statutory probation periods

In response to employer concerns that day one protection against unfair dismissal would compromise their ability to correct hiring mistakes, the government is introducing a statutory probation period. Many employers already operate probationary periods, but these are not currently regulated by statute.

During the new statutory probation period, employers will be able to dismiss employees for reasons including conduct, capability, statutory restriction, or some other substantial reason related to the employee, using a ‘lighter touch and less onerous process’. Exactly what will constitute ‘light touch’ will be determined via consultation, but the government has suggested that the employer will likely need to hold a meeting with the employee, who can choose to be accompanied, to discuss their performance concerns, before making a decision regarding dismissal.

This ‘light touch’ approach will not apply to redundancy dismissals, meaning that the usual ‘fair’ process will need to be followed from day one for such dismissals.

The length of the statutory probation period is another detail which is yet to be ironed out, but the government has indicated that it supports a nine-month period. Similarly, the government has suggested that compensation for unfair dismissal will be lower during the statutory probation period, but this principle – as well as the degree of the reduction – will be subject to consultation.

How are employers likely to respond to these changes?

There has been much speculation as to how employer behaviour might alter in response to these changes. Employer representative bodies, including the IoD, have warned government that the changes are likely to lead to employers tightening up their recruitment processes and, consequently, being less willing to give potential employees with non-traditional backgrounds and experience a chance. We have received a considerable amount of feedback from IoD members along these lines:

“At our organisation we take a chance with some slightly unusual candidates who on paper may not fit the job spec. This is often very successful – but in around 25% of cases we do have to let them go. This [policy] will tighten up our recruiting culture and will lead to marginalised candidates not getting a chance.” – 100-249 employees, Real estate, South East England

“Recruitment mistakes are not uncommon, so our business works hard to make good decisions and to unravel problems in a fair way. These new proposals will make that more risky so we are less likely to recruit staff or create jobs.” – 10-49 employees, Financial services, Wales

The implications of this for candidates on the fringe of the labour market – precisely the group which the government needs to get into the workforce if it is to meet it’s 80% employment target – are obvious. It was in response to these concerns that the government committed to the aforementioned statutory probation period, but IoD research in October found that this policy will do little to assuage employers’ concerns about the policy. Indeed, only one in 10 business leaders reported that the probation period would fully alleviate their concerns:

IoD Policy Voice results, October 2024 (642 responses)

Employees will get protection from unfair dismissal from day one of employment, but employers will be able to operate probationary periods during which there will be a lighter-touch process for dismissing an employee who is not right for the job. 

To what extent do you think a 9-month probationary period would alleviate any impact on the cost and risk of employment resulting from staff having day one protection against unfair dismissal? 

The full impact of the policy on employers’ hiring intentions and practices will only be known once all the details are clarified, but it seems highly likely that it will at the very least encourage many employers to take fewer risks when hiring new staff.

What should employers do to prepare?

Although the changes will not be implemented until autumn 2026 at the earliest, and the lack of clarity on several key areas means that it is too soon to alter employment practices in response, employers should start planning how they will respond to the new law and regulations. Steps might include:

• Introducing more rigorous recruitment processes, to reduce the chances of needing to dismiss new hires;
• Aligning existing contractual probationary periods with the statutory probationary period;
• Putting in place processes during the statutory probation period to make it easier for managers to decide whether to pass their staff’s probation periods; and
• Training management and HR professionals on both the ‘light touch’ process and the usual, more thorough dismissal processes (for cases where employees are dismissed after they have passed the statutory probation period).

The coming months should bring more clarity for employers, as the Bill is expected to be passed into law before the summer recess and further details of the accompanying regulations consulted on. Keep an eye out for future Employment Matters blogs, which will explore both those developments and other areas of employment law being shaken up by the Bill.