Employee Rights Bill – Update – unfair dismissal changes

Labour’s Employment Rights Bill has now passed the initial House of Commons stage and the second reading is due to take place this month (scheduled for 27 March 2025).

When will the changes come into effect?
It is anticipated that the majority of the changes will come into effect no earlier than 2026. The changes to unfair dismissal rights will probably come into effect later on in 2026, sometime around Autumn.

What are the main changes to unfair dismissal rights?
1. The two year qualifying period to bring an ordinary unfair dismissal claim will be removed.

2. This will become a day one right so that once an employee has started work they can potentially claim unfair dismissal,

3. There will be a different test for what has been referred to as ‘the initial period of employment’ where the unfair dismissal test will be adjusted.

4. The devil will be in the detail and at the moment, the definition of ‘the initial period of employment’ will be subject to further consultation. The current indication is this period may last nine months and there will be a ‘modified test’ in place – this may be similar to the same rules that apply to a probationary period.

5. We currently have no real details about what any modified test might look like and what the process will be. What an employer is likely to have to show is that any dismissal in this initial period will have to be for one of the following reasons:
                   a. Capability
                   b. Conduct
                   c. Statutory bar
                   d. Some other substantial reason

6. During this initial period of employment, there is likely to be lower compensation available.

7. In addition, the length of time to bring a claim for unfair dismissal will change from 3 months to 6 months.

What should employers be doing?
It will be helpful to try to change company mindset and actively manage all probationary periods moving forwards. This will mean that when the change does come into force, it will not seem like such a big change for line managers.

Policies will need to reviewed, along with recruitment procedures.

Given the employment tribunal system is already incredibly busy, it will be interesting to see how
they manage with what is likely to be an increase in litigation.