Unfair dismissal – 547 reasons for new starters to (eventually) celebrate

Current situation

In 2012, the qualifying period for employees to be able to bring a claim for unfair dismissal was increased from one year to two years. This meant that a person had to be in employment for two years before they could bring an unfair dismissal claim.

This meant many employees were vulnerable to dismissal from their employees until they reached the second anniversary of their employment, being entitled to little more than their contractual or statutory notice period if their employer chose to dismiss them for any reason not connected with discrimination or a protected disclosure. 

Following the qualifying period, an employer generally must justify the reason for dismissing an employee, which could be capability, conduct, redundancy, illegality or some other substantial reason. If an employer fails to justify a dismissal using one of these reasons, an employee can be entitled to compensation for their dismissal.

Labour’s manifesto

Labour in their manifesto suggested reform to unfair dismissal rights.  

This was later affirmed in the Kings Speech of July 2024 where an employment rights bill was to be introduced with reference to day 1 employment rights, including the rights not to be unfairly dismissed. The reality was however that employers would still be able to dismiss during a probationary period.  

Whilst initially lauded by Trade Unions, this pledge raised eyebrows particularly in business given concerns over the workability of it. At the time the Confederation of British Industry warned that employers could be reluctant to take on new staff as a result.  

Parliamentary ‘ping pong’

Labour has attempted to push through the plan for day one unfair dismissal rights regardless, however they have met fierce opposition in the form of Tory and Lib Dem peers in the House of Lords. The Lords have sent the bill back with amendments to Parliament on at least three separate occasions now, calling for day one rights to instead be adjusted to six-month rights, or after approximately the 183rd day of service. Following brokering with business leaders and trade union leaders, the Labour government has now accepted the Lords’ amendment and is content for unfair dismissal to start from approximately the 183rd day - 547 days sooner than the previous rights which commenced on 730 days - representing a significant benefit for employees.  

There had been serious concerns on the workability of day one unfair dismissal rights, which in reality would not have been day one rights given likely concessions in relation to qualifying or probationary periods. The new baseline of six months should hopefully give some certainty once the legislation comes into force which should be announced by the House of Commons shortly. Trade Union Congress has also indicated they agree with this compromise of a six-month qualifying period.  

A further concession for employees?

In what is potentially a further concession for employees, the government’s press release stated that:

“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."

Currently unfair dismissal claims are capped to 52 weeks’ pay up to a maximum of £118,233 (for 2025). We will await details of what the new cap will be, but this may mean that workers may be entitled to claim compensation for unfair dismissal in excess of a year or that higher earners may be able to claim compensation for a larger proportion of their salaries.  

Conclusion

While final details of the Employment Rights Bill are awaited, at least in the realm of unfair dismissal, it seems the landscape for employers and employees may be radically difference come next summer.