What to start thinking about now in preparation for the introduction of day-one unfair dismissal rights.
The Employment Rights Bill contains a number of significant reforms. Perhaps one of the most important changes proposed in the Bill is a provision to remove the current two-year qualifying period that permits employees to bring “ordinary” unfair dismissal claims.
Processes that may have been truncated by employers in the past (if any process was followed at all) for employees with less than two years of service, such as dismissals following misconduct investigations, performance management procedures and redundancy exercises, will be put under increased scrutiny and held to a higher legal threshold.
What we know
Helpfully, employers have time to prepare. The changes to the Unfair Dismissal regime are anticipated to come into effect in October 2026, two years after the introduction of the Bill.
We also know that employees must have started working in the role before they are entitled to “ordinary” unfair dismissal rights. This will prevent employees who have signed the employment contract but who have not started work from being able to bring an unfair dismissal claim.
In relation to new joiners, an initial period of employment (IPE), commonly known as a probationary period, will be implemented by law. The current proposal from the Government is that this will be the first nine months of employment. During the IPE, a “lighter touch” dismissal process will be in operation where the reason for dismissal is capability, conduct, illegality, or “some other substantial reason”.
However, the Government’s policy document also states that the intention is for the IPE to have meaningful safeguards to provide stability and security. This implies that employees will still benefit from a degree of statutory protection during the IPE despite the suggestion of a “lighter touch”.
It is also worth noting that redundancy exercises that may be required for employees with less than two years of employment appear to be excluded from any “lighter touch” process during the IPE. Therefore, it appears a full and fair redundancy process will need to be followed for all employees at any time after day one of their employment.
What we are waiting on
The details of the lighter touch process remain outstanding. We are yet to know the procedural steps that employers are required to take to be able to fairly dismiss an employee during the IPE. We are also unsure of exactly how the compensation for unfair dismissal claims will be capped. The amendments proposed to the Bill give the Secretary of State the ability to specify the maximum amount of compensation available during the IPE, but the exact detail remains outstanding.
Equally, we await further information on the remit of the Fair Work Agency that may act on an employee’s behalf to assist them when asserting unfair dismissal rights.
Practical tips for employers to start preparing now
- From the beginning of 2025, watch carefully for the Government’s announcement that the consultation exercises on unfair dismissal and the reach of the Fair Work Agency are open. Actively participate and share your organisation’s views on the practical impact of the proposals and any concerns that have arisen.
- Start anticipatory adjustments to long-term budgets and resources. Potential increases of costs and allocation of staffing on the horizon may include the following:
- Internal staff or external advisors to carry out amendments to company policies and processes including disciplinary policies, and performance management procedures, to ensure compliance with the new law, including new sections setting out the “lighter touch” prescribed process during the IPE.
- There may be a higher number of employees potentially alleging unfair processes leading up to their dismissal, which may need to be dealt with by HR staff internally. The associated investigations are likely to be time consuming and could require external personnel support.
- Potential increase of claims by employees to the Employment Tribunal. Associated legal fees may go up, particularly when seeking advice on complex allegations.
- Start thinking about the training and messaging required to ensure managers understand the future shift of the law relating to poor performers, cases of misconduct and redundancy situations for employees with less than two years’ service. Points to consider:
- What is your organisation’s general management culture and mindset when it comes to dismissing poor performing employees? Are difficult conversations side-stepped in opaque circumstances with a preference to lean on redundancy situations?
- Do expectations require adjusting in the longer pipeline to ensure prompt action to deal with a potential dismissal rather than postponing ahead of the 18-month mark when a concern then comes into focus and employment is brought to an end with a truncated, high-level process?
- Do you have managers sitting in countries where there are lesser requirements to dismiss such as “fire at will” from day one?
If you have any questions about these issues in relation to your own organisation, please contact a member of the HRLaw team or speak to your usual Fox Williams contact.
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