Unfair dismissal changes to apply for new hires from July 2026

The new six-month qualifying period for protection from unfair dismissal looks set to commence on 1 January 2027, meaning it will apply to anyone starting employment from 1 July 2026.

The government is expected to announce the date on Monday, because last week's U-turn scrapping of the long-proposed day-one right means it can accelerate implementation, since the legislative change is now much simpler.

The business secretary Peter Kyle has tabled amendments to the Employment Rights Bill today reflecting the change, together with provisions to scrap the compensatory limits for unfair dismissal awards in the employment tribunal, as reported yesterday.

Earlier this week, it emerged that former deputy prime minister Angela Rayner, the architect of much of the workers' rights bill, had been planning to table an amendment to bring forward the implementation date for the unfair dismissal measures. Following discussions with Kyle, she will no longer do that.

In a post on X, Rayner commented on the unfair dismissal date: "Delighted workers will now benefit quicker from our landmark Employment Rights Bill. Workers recruited in July 2026 will automatically get protections from unfair dismissal when the law comes into force. Real change for workers."

The Bill returns to the House of Commons on Monday for further debate and the government hopes its compromise is enough to deter any further opposition from the House of Lords.

Colin Leckey, partner in the employment team at Lewis Silkin said: "Given the very significant concession the government made last week, it might have been hoping that in return, the Lords drops all its other objections and allows the Bill to pass.

"However, what initially looked like a compromise is now looking more like a Trojan horse - businesses that were reassured by the concession on day one unfair dismissal protections, will now have been left reeling by the prospect of facing compensation claims with no statutory cap.

"This amendment might complicate things further however as it's not clear that the Lords will so easily agree to waive through such a fundamental shift."

He added that scrapping the cap altogether without due consultation would be an "extraordinary and unprecedented move" given the impact of this measure. Changes to unfair dismissal compensation awards were not part of Labour's election manifesto and have not featured in calls for evidence or the government's impact assessment.

Leckey said: "It will be hard to predict the long-term impact as we've never had uncapped compensation for unfair dismissal before. It may make employers more reluctant to dismiss employees and increase the popularity of voluntary severance exercises. It could impact decisions on whether to recruit at all.

"It could certainly increase the attractiveness of consultancy or alternative resourcing models. We would expect employers to be more cold-blooded in operating probationary periods and terminating employment before employees reach the six-month mark. This does not sound like a recipe for growth."

Ben Smith, associate at law firm Littler, said: "Removing the caps entirely also makes it more difficult for unfair dismissal claims to be resolved without litigation, if potential claimants have unrealistic expectations of compensation the tribunal might award.

"If the cap is removed entirely and the reduction of the qualifying period to six months, dismissals will be more complex and potentially more expensive for employers. This is particularly the case for high earners who will now have more motivation to pursue unfair dismissal claims if there are significant amounts of lost salary or bonuses on the line. An influx in such high-value claims would only add to tribunal backlogs."