Yesterday, the Government announced that it had backed down on its plan to introduce Day 1 unfair dismissal rights. This comes following significant push back from the House of Lords in parliamentary debate and discussions with key business stakeholders.
Instead, the Employment Rights Bill (“ERB”) will set the qualifying period of service at six months for ordinary unfair dismissal claims – which is the amendment the House of Lords has been pushing for.
This is a significant concession by the Government and shows their eagerness to secure, and finalise, the ERB’s passage through Parliament.
To strengthen unfair dismissal protection further, the Government will also amend the ERB so that:
- The statutory cap on unfair dismissal compensation will be lifted. It is not clear whether this means removing it entirely, or replacing it with a higher or different cap.
- Primary legislation (i.e. an Act of Parliament) will be required to amend the qualifying period of service for unfair dismissal again in the future.
What does this mean?
The shift from Day 1 rights to a six-month qualifying period is a significant recalibration. It balances stronger protections for employees with a period of adjustment for employers. At the same time, any significant change to the compensation cap could lead to a fundamental change in the value of unfair dismissal claims - which may reverse any reduction in claims which would result from the compromise that has been reached.
Practical implications for HR and employers
- Ensure recruitment and dismissal processes are robust, fair, and well documented.
- Train managers to reinforce the importance of following procedure and considering alternatives before dismissal.
- Factor in potentially higher compensation awards when evaluating dismissal decisions.
- Anticipate that settlement discussions may involve higher figures than before.
Final thoughts
The move to a six month qualifying period, combined with lifting of the compensation cap, signals a major rebalancing of workplace rights. Employers should act now to prepare for the new landscape, while employees and advisers will be watching closely to see how tribunals apply these changes in practice.
Meanwhile, the ERB will return to the House of Commons for consideration on Monday 8th December. The Christmas Parliamentary recess starts on 18 December (House of Commons) and 19 December (House of Lords) so, despite this compromise, it still seems unlikely that we’ll see Royal Assent before next year and the implementation timetable may slip as a result.
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