Government U-turns on day-one unfair dismissal rights

The government will reduce the qualifying period for unfair dismissal from two years to six months, dropping Labour's longstanding manifesto commitment in the Employment Rights Bill to make it a day-one right.

The Department for Business and Trade (DBT) said it had convened a series of constructive conversations between trade unions and business representatives. The discussions concluded that reducing the qualifying period for unfair dismissal from 24 months to six months - while maintaining existing day-one protection against discrimination and automatically unfair grounds for dismissal - is a "workable package".

A statement from the DBT said: "It will benefit millions of working people who will gain new rights and offer business and employers much-needed clarity. To further strengthen these protections, the government has committed to ensure that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted."

The U-turn means ministers can now move forward on the issue of unfair dismissal protections in the Employment Rights Bill in the hope that it reaches Royal Assent and keeps to the government's published delivery timeline.

This will mean delivering day-one rights to sick pay and paternity leave in April 2026, as well as launching the Fair Work Agency. The government said: "Reforms to benefit millions of working people, including some of the lowest paid workers, would otherwise be significantly delayed if the Bill does not reach Royal Assent in line with our delivery timetable. Businesses too need time to prepare for what are a series of significant changes."

Six business organisations, including the CIPD, CBI and the Recruitment and Employment Confederation, said in a statement: "Businesses will be relieved that the government has agreed to a key amendment to the Employment Rights Bill which can pave the way to its initial acceptance.

"We welcomed this chance to hold meaningful dialogue and believe the constructive nature of our discussions can be a template to resolve outstanding issues.

"Businesses have always been clear that making the Employment Rights Bill work would take business, trade unions and government working together to find a landing zone for these major policy changes.

"This agreement keeps a qualifying period that is simple, meaningful, and understood within existing legislation. It is crucial for businesses confidence to hire and to support employment, at the same time as protecting workers.

"This change addresses the key problem that must be sorted in primary legislation. It shows that dialogue works and is a model for how to consider the important questions that need answering in regulations before new rules come into force."

TUC general secretary Paul Nowak said: "The Employment Rights Bill is essential to better quality, more secure jobs for millions of workers across the economy. The absolute priority now is to get these rights - like day one sick pay - on the statute book so that working people can start benefitting from them from next April.

"Following the government's announcement, it is now vital that peers respect Labour's manifesto mandate and that this Bill secures Royal Assent as quickly as possible."

The statement from the six business organisations, which also included the British Chambers of Commerce, the Federation of Small Businesses, and Small Business Britain, continued: "Businesses will still have concerns about many of the powers contained in this Bill. This includes guaranteed hours contracts, seasonal and temporary workers and thresholds for industrial action.

"We remain committed to working with government and unions to dealing with this in the necessary secondary legislation to implement the Bill. We must ensure that it supports opportunity for workers while avoiding damage to economic growth.

"That also means agreeing guidance and support for businesses to understand and effectively implement the many changes, alongside sufficient resources for the Fair Work Agency and tribunal system."

The DBT said that as a result of these constructive conversations, the tabling of the necessary amendments, and a commitment by the government to a robust process to ensure full, fair and transparent consultation and discussion on the detail and application of the secondary legislation, businesses and unions agree that the Bill can progress.

The Employment Rights Bill has been subject to parliamentary ping-pong as the House of Lords has continued to resist measures in the Bill, particularly on day-one rights to claiming unfair dismissal.

Nye Cominetti, principal economist at the Resolution Foundation, welcome the government's move. He said: "The Employment Rights Bill contains a welcome package of measures to improve conditions for those most likely to suffer from insecurity at work.

"But the reforms have risked being derailed by the new 'day one' right to protection against unfair dismissal. The UK currently has one of the longest qualifying periods for protection which needs to come down. But scrapping it entirely would have meant lurching from one extreme to the other and putting firms off hiring new workers.

"This sensible move to a six-month qualifying period will bring the UK into line with other countries, deliver tangible improvements to working conditions, and help the government move forward with other key aspects of the Employment Rights Bill."