Day one rights: What the government’s U-turn on unfair dismissal means for employers

The government has scaled back its plan for day one unfair dismissal rights, opting instead for a six-month qualifying period and signalling further possible changes to unfair dismissal compensation.

The key change employers need to understand

As part of its Employment Rights Bill (ERB), the government had previously committed to introducing day one protection from unfair dismissal. This requirement for no qualifying service has now been withdrawn. Instead, unfair dismissal rights will begin after six months’ service.

The shift was announced alongside the November Budget and marks a significant departure from one of the government’s flagship employment reform commitments. You can read the government’s press release on the updated ERB here.

Why has the government reversed its position?

The proposal for day one unfair dismissal rights has been one of the most debated elements of the ERB.

Employers and business organisations consistently raised concerns that removing the qualifying period could reduce hiring confidence, increase the likelihood of early-stage disputes and restrict flexibility during probation. We have heard similar hesitation from clients who were concerned about higher risk in the early months of employment.

Unions and worker-rights advocates have criticised the reversal as a missed opportunity to improve protections for workers in insecure roles.

Political pressure also played a part. The House of Lords has twice voted in favour of a six-month qualifying period, and this appears to have pushed ministers towards compromise. The Government has said the change was necessary to secure Royal Assent and keep the Bill on its current delivery timetable.

Will compensation limits for unfair dismissal also change?

One area that remains unclear is compensation. The Government announcement states that the current cap may be “lifted”, but the wording leaves room for interpretation. At this stage it is not possible to tell whether “lifted” means:

• removed entirely
• increased significantly
• adjusted by removing the 52-weeks’ pay limit while retaining an overall ceiling

Removing the cap altogether would be a major change to the employment law landscape. It would increase potential exposure for employers, particularly in claims involving high earners or employees who may struggle to secure alternative work quickly. It would also make early settlement assessments more challenging, as employers would have less certainty about potential financial outcomes.

Which day one rights still remain?

Despite the U-turn on unfair dismissal, the Government intends to proceed with other day one rights contained in the ERB. These include:

• statutory sick pay from the first day of absence
• day one paternity leave rights

These measures are currently scheduled to take effect in April 2026.

What employers should do now

While the Bill continues through Parliament, employers should begin assessing where they may need to adapt. Immediate actions to consider include:

• Review probation policies – Confirm whether your existing probation structures remain appropriate if a six-month qualifying period is introduced and consider whether performance review points need strengthening.

• Begin modelling risk scenarios – If compensation caps are removed or increased, employers should assess how this may affect potential exposure across roles and grades, and consider any impact on insurance arrangements.

• Plan ahead for April 2026 operational changes – Day one statutory sick pay and paternity leave entitlement will require adjustments to payroll processes, sickness management and leave systems.

• Track the Bill’s progression closely – Further amendments are possible. Employers should stay alert to developments relating to:
  • the final qualifying period
  • any variation to compensation caps
  • transitional rules for employees who gain service while the changes take effect

What happens next?

The Government maintains that the broader employment reform package remains intact, but the reversal on such a central commitment suggests that further changes are possible as consultation continues.

We will continue to monitor the Bill as it progresses and will publish updates when further detail is available.