Employment Rights U-Turn Sets a New Approach to Early Dismissals

The government has issued a major update on the Employment Rights Bill, marking a clear U-turn from its earlier commitment to introduce day one unfair dismissal rights.

After months of parliamentary debate and concern about the practical impact on employers, ministers have now confirmed that day one rights will not be introduced. Instead, the Bill will progress with a six month qualifying period, representing a significant shift from the original proposal.

For employers and HR professionals, this changes expectations many had already started planning around. While the six month threshold still shortens the window before statutory protection applies, it is undeniably a more manageable position than the previously proposed day one model. The original proposal would have required organisations to rethink how quickly performance concerns were identified and how much protection employees received from the moment they joined. By contrast, the six month approach offers employers some breathing space, though it still reduces the safe period substantially compared with the current two year qualifying period.

The decision is likely to come as a relief to many employers and HR practitioners, as it eases earlier concerns about balancing stronger worker protections with the need for confident hiring and manageable performance management.

Yet the updated Bill contains a second, more unsettling development - the government’s intention to remove the statutory cap on unfair dismissal compensation. This had not been widely flagged in earlier drafts and will likely be viewed as a substantial and unexpected shift. Without a cap, compensation awards could be significantly higher (particularly for senior or high earning employees) increasing financial exposure even where dismissals occur after only six months of service. This could lead to a more cautious, risk averse approach not only to dismissals but also to hiring decisions.

Taken together, the U-turn on day one rights and the proposal to lift the compensation cap may create a tougher environment for employers. Whilst the revised qualifying period introduces clarity and predictability,  the removal of compensation limits raises the bar on how carefully dismissals must be managed. For employers, this is likely to mean revisiting onboarding, probation and performance management processes, tightening documentation, ensuring managers are well trained in hiring and performance management and reassessing overall employment risk.

As the Bill moves closer to final passage and as its details become clearer, employers should monitor developments closely and begin preparing for change now. The legislation may offer more flexibility than originally feared, but it also increases the stakes in ways that require careful, proactive planning. We are here to support you as these proposals evolve and to help you navigate any steps you wish to take in response. For any further information or support please don't hesitate to contact our Employment Law Team.