The right to claim unfair dismissal is a flagship UK employment protection. It has never been a day one entitlement and, following the Government’s announcement last week, it appears this will remain the case – at least for now.

Before the 2024 general election, Labour made a bold pledge: if elected, it would make unfair dismissal a day-one right for all employees. Trade unions welcomed the proposal; many employers did not. After Labour won the election, provisions creating an effective day-one right were included in the draft Employment Rights Bill published in October 2024.

However, following extended parliamentary ‘ping pong’ with the House of Lords, who repeatedly opposed the measure, the Government confirmed last Thursday that it is abandoning the day-one proposals. Instead, it will pursue a reduced six-month eligibility period “to ensure [the Bill] can reach Royal Assent and keep to the Government’s published delivery timeline”.

The current law

Under the Employment Rights Act 1996, employees can only claim ordinary unfair dismissal once they have two years’ continuous employment. This qualifying period can currently be amended by statutory instrument, so it does not require a full Act of Parliament to change.

Some dismissals attract day-one protection because they are treated as ‘automatically unfair’. These include dismissals connected to whistleblowing or health and safety concerns.

Compensation for ordinary unfair dismissal consists of two elements. The basic award mirrors the formula used for statutory redundancy pay and is generally awarded in full if dismissal is found to be unfair. It is not linked to the actual loss suffered. In addition, tribunals may make a compensatory award based on past and future financial losses arising from the dismissal. This is subject to a cap of either 52 weeks’ pay or £118,223, whichever is lower.

The Government’s original proposal

The draft Employment Rights Bill proposed making ordinary unfair dismissal a day-one right. During an ‘initial period of employment’ – expected to be set at nine months – a lighter-touch process would have been needed to ensure fairness, although this would not have applied to redundancy dismissals.

The original Bill did not suggest any alteration to the compensation framework for ordinary unfair dismissal.

The Government’s new proposal

The Government now intends to reduce the qualifying period for ordinary unfair dismissal from two years to six months.

Day-one rights for automatically unfair dismissal will remain unchanged.

A significant shift is the proposal that the qualifying period should no longer be amendable by statutory instrument; instead, any future variation would require primary legislation. If enacted, this would make the six-month period relatively stable for the long term.

The Government’s announcement also stated that “the compensation cap will be lifted”. This is new and was not reflected in the original Bill. The exact meaning is unclear. It seems unlikely that unfair dismissal awards would become entirely uncapped, as in discrimination claims. A more probable outcome is that the 52-week pay cap will be removed while the upper monetary limit (£118,223) remains. If so, lower-paid employees could see the greatest relative increase in potential awards.

What does this mean for HR?

HR teams have spent much of the past year preparing for a world in which unfair dismissal rights apply from day one. Some focused on risks in recruitment and the need for rigorous hiring decisions. Others worked on strengthening procedures for the proposed ‘initial employment period’.

That work is not wasted. If the six-month qualifying period is implemented – as now appears likely – HR should consider the following:

  • No immediate change. The Government’s implementation roadmap indicated that unfair dismissal reforms would take effect in 2027. Nothing in the latest announcement suggests an accelerated timetable.
  • Review probation policies. Updating probationary procedures to align with a six-month qualifying period will ensure managers are accustomed to early, structured assessments of performance and conduct. Having systems that prompt timely action before the six-month deadline will prove valuable once the law changes.
  • Build in ‘slack’. To avoid eligibility issues caused by delayed meetings or extended review periods, consider ensuring probation policies allow decisions to be taken well before the six-month mark.
  • Remember the statutory week. Where employment is terminated without notice, a ‘statutory week’ is added to the employee’s length of service. A dismissal intended to fall within the six-month window could inadvertently tip over the threshold once this week is included.

Separate from eligibility, the potential removal of the 52-week cap has important practical implications. If the upper limit on compensatory awards shifts to a single monetary cap, lower earners could bring significantly higher-value claims. HR teams should therefore prioritise early evidence-gathering following contentious dismissals, particularly around mitigation. Demonstrating that an ex-employee has not taken reasonable steps to find alternative work will be a key tool in managing compensation exposure.