Substantial changes to UK employment law are due to be implemented over the next year under the Employment Rights Bill (ERB). These mostly benefit employees, the most significant being ‘day one, unfair dismissal rights’. However, this provision will not be in force until October 2026 at the earliest to allow for ‘full consultation and a substantial period for employers to prepare and adapt’. Until then, the current qualifying period of two years’ service to bring an unfair dismissal claim will continue to apply. This article sets out the current proposals.
Background
Currently, employees are required to have two years’ continuous employment to bring an unfair dismissal claim unless the dismissal is ‘automatically unfair’ in which case no qualifying period is required. This applies if the dismissal is due to specified reasons such as maternity or pregnancy.
The practical effect of the qualifying period is that it allows an employer to dismiss an employee during the first two years of employment without going through a disciplinary or capability procedure. This is generally required to defend an unfair dismissal claim in order to show a fair process.
The two year qualifying period has applied since 2012 when it was increased from one year’s continuous employment.
Changes under the ERB
Under the ERB, employees will have the right to claim unfair dismissal from day 1 of employment. However, this will be subject to a new modified “light touch” dismissal procedure during an initial period of employment (IPE).
Exact details of the IPE and ‘light touch’ procedure will be set out in regulations and are currently unknown. However, the government has indicated that its preference would be for a nine month initial period. Provided the dismissal occurs during the IPE or the notice expires within three months of the last day of the IPE and the principal reason relates to capability, conduct, statutory restriction or some other substantial reason, then that would be deemed to be a fair dismissal assuming the employer has complied with the dismissal procedure.
Current proposals for the “light touch” procedure suggest a meeting with the employee to tell them why they are being dismissed and confirmed in writing.
Other proposals include limiting the amount of compensation awarded if the dismissal occurs during the initial period.
After the IPE, employees would have full unfair dismissal rights for which the maximum compensation is 12 months gross pay subject to a cap of £118,223 although average awards are low (£14,000*). However, the time and costs for the employer of defending an employment tribunal claim are more damaging.
*Latest tribunal statistics
Comment
A fair compromise to balance the interests of employers and employees would have been to change the qualifying period back to one year.
The introduction of ‘day one’ unfair dismissal rights will impact significantly on all businesses given that companies will have to ensure they follow a dismissal procedure during the first 9 months of employment and still have the risk of an unfair dismissal claim (whether or not justified).
It will also contribute to an already significant backlog of employment tribunal claims and encourage a compensation culture in which employees are paid off simply to avoid the cost of litigation.
The final details of ‘day one’ rights have yet to be determined but all employers will need to ensure they are fully prepared before the changes take effect.