Government U-turns on plans for day one rights

The government’s flagship Employment Rights Bill initially contained provisions to give employees statutory rights regarding unfair dismissal from their first day at work. However, Department for Business and Trade ministers confirmed this week the Bill will be watered down to ensure it makes it through Parliament in time for its scheduled April 2026 implementation.

Employees will now be able to bring a claim for unfair dismissal after six months, under the bill—still a major reduction from the current qualifying period of 24 months.

Jo Mackie, employment partner, Michelmores, said: ‘This is no surprise.

‘It was unwieldy and unworkable and we predicted this would happen as soon as it was launched. Probation periods are important for both employees and employers and the tribunals would really have struggled to keep up with the raft of new claims that would have arisen.’

Rena Magdani, partner, Freeths, said the change ‘offers clarity to employers and employees and avoids what would likely have been complexity and uncertainty generated by the government’s proposed “light-touch procedure” during an “initial period of employment”’.

Ministers also confirmed this week the unfair dismissal compensation cap will be lifted.

Magdani said: ‘The current compensation cap is the lower of one year’s pay or £118,223. 

‘While the average unfair dismissal award is significantly lower than this cap, if the cap is significantly increased or removed, then the level of exposure to employers in unfair dismissal claims will increase, particularly in cases of high-earners, or those whose dismissal results in them leaving defined benefit pension schemes, or employees who struggle to find alternative employment.’

The bill will retain its provisions for day one rights to sick pay and paternity leave in April 2026 as well as launching the Fair Work Agency.

Welcoming the U-turn on day one unfair dismissal protection, James Townsend, partner, Payne Hicks Beach, said there was ‘still time for ministers to rethink and scale back other measures, particularly those that will significantly expand union power’.