The Employment Rights Bill: Upcoming changes to the UK’s unfair dismissal regime

In the last 50 years, there has always been at least a 6-month qualifying period required to bring an unfair dismissal claim. The government’s proposals under the Employment Rights Bill to sweep away the qualifying period therefore leads employers into uncharted territory. 

Unpacking the proposals 

Currently, employees are only eligible to bring normal unfair dismissal claims after two years’ service. However, as part of its package of employment reforms, the government intends to make this claim available from day one. 

This will be subject to the following:

• A new concept of an ‘initial period of employment’ – essentially a statutory probationary period where employers will be able to follow a modified, lighter-touch process to fairly dismiss employees who are unsuitable. 

The government will consult on how long this will be and what it should involve, but their initial suggestions are that it could last for 9 months and require employers to meet with employees to discuss performance, with employees having the right to be accompanied by a colleague or trade union representative.¹  

Significantly, this will not apply to redundancy dismissals. This means employers considering redundancies will need to follow the same fair process for all employees, regardless of length of service, to manage unfair dismissal risk.  

• Potential changes to the compensation regime – the Bill creates a power for the government to vary the maximum compensatory award if someone is unfairly dismissed within the initial period of employment, the expectation being that the cap would be reduced. (Currently, successful claimants can receive up to £115,115 (or 52 weeks’ pay, if lower) as a compensatory award.)
• Pre-employment claims barred – those who have not yet started work will be ineligible to bring a claim, save for where the dismissal is for a specified reason such as pregnancy or assertion of a statutory right. 

With almost 9 million employees with less than two years’ service, the immediate consequences of this change on tribunals, employers, and employees are significant.²  

Employment tribunals: breathing space or bottleneck?

Unfair dismissal is already the most frequently presented claim in the ET.³  With the tribunal reporting a 31% increase in its open caseload in Q4 2024/2025 compared to the same period the previous year and waiting times at an all-time high, the reforms undoubtedly raise questions about the tribunal’s ability to accommodate a potential surge in claims. ⁴ 

One perspective is that the separately proposed extension of time limits for bringing a claim (from 3 months to 6) will offer the tribunal breathing space. Parties will have more time to settle their disputes without recourse to litigation. 

Others believe that making unfair dismissal a day one right will stop claimants shoehorning claims into more complex discrimination and/or whistleblowing claims (which often take longer to be heard by the tribunal) thereby freeing up tribunal time.

The more sceptical take a different view and fear the changes risk overwhelming an already strained tribunal system. 

Even if tribunal claims are not lodged by disgruntled employees, businesses (and in particular, HR teams) will need to be prepared for an uptick in allegations of unfair dismissal which may need to be settled out of court – with all the time, cost and effort that involves.

Probationary periods in a different light

By bringing so many more individuals within the remit of the unfair dismissal framework, employers are likely to reassess their approach to managing their workforce. 

The government have said that the changes will not come into effect before Autumn 2026. However, when the Labour government reduced the qualifying period from two years to one year in 1999, the shorter qualifying period applied to all dismissals that took effect on or after the date the legislation was changed. If the same approach is taken this time, all employees will immediately benefit from the right not to be unfairly dismissed when it comes into force, not just new hires from Autumn 2026. 

This brings employers’ existing practices into sharp focus. Considerations for employers may include:

• Enhancing hiring processes to better assess candidate suitability  
• Assessing the current approach to managing performance during probation and whether it calls for a more formal, structured process (including more robust processes around whether someone has “passed” or “failed” their probation)
• Updating existing probationary period wording in contracts and policies to reflect any changes to the performance management process
• Whether or not to align contractual probationary periods with the statutory ‘initial period of employment’. Although this isn’t necessary, if employers do extend contractual probationary periods to match the initial period of employment, they should consider whether any adjustments are needed to notice periods and eligibility for benefits entitlements. 

One possible consequence is that some employers may take decisions on suitability or performance more quickly than before, choosing to dismiss before the expiry of the ‘initial period of employment’ in order to benefit from the less stringent dismissal procedure that will apply (instead of potentially giving an employee up to two years to improve). 

However, even if an employer is able to demonstrate that a dismissal within the ‘initial period of employment’ was procedurally fair, employees will still be able to challenge the fairness of the reason for that dismissal. So, employers must ensure that they have sufficient evidence to demonstrate misconduct or poor performance.

A consultation on what the ‘initial period of employment’ will look like is awaited. 

For more information on the reforms, visit our dedicated UK Employment Law Reforms Tracker or get in touch. 

¹  Next Steps to Make Work Pay policy paper (November 2024) 

²  See DBT Impact Assessment (October 2024)

³  Tribunals Statistics Quarterly, see Annex C: Employment Tribunal Receipts Tables 

⁴  Tribunal Statistics Quarterly: October to December 2024