Government backs down on day-one dismissal rights – but changes still coming

The government has confirmed a major change to its flagship Employment Rights Bill.

It has dropped its plans to give workers protection from unfair dismissal from day one.

Instead, it'll reduce the qualifying period for most unfair dismissal claims from two years to six months.

This is the result of intensive talks between ministers, trade unions and business groups, and is being presented as the compromise that allows the wider Bill to pass on time.

What's changed on unfair dismissal

The key points from today's update:

• The qualifying period for ordinary unfair dismissal will fall from 24 months to six months.

• Existing day-one protections against discrimination and "automatic" unfair dismissal (for example, health and safety, whistleblowing, trade union activity) remain unchanged.

• The government will write into law that the qualifying period can only be changed again by primary legislation, not by secondary regulations.

• It'll lift the cap on compensation for unfair dismissal and later set down the detail in secondary legislation.

The government's line is that this package "will benefit millions of working people who will gain new rights and offer business and employers much needed clarity", while allowing the Bill to reach Royal Assent in time for its Make Work Pay timetable.

What still sits in the Employment Rights Bill

The unfair dismissal compromise affects one part of the Bill.

The wider package is still substantial. According to the government, the Bill will do the following:

• Introduce day-one rights to sick pay and paternity leave from April 2026 and remove the lower earnings limit for Statutory Sick Pay, bringing more low-paid and part-time workers into scope.

• Create a new Fair Work Agency to enforce minimum wage, holiday pay, sick pay and aspects of agency work and labour market standards.

• Tighten rules on exploitative zero-hours contracts and highly unpredictable work. Workers who work regular patterns will receive a right to a contract that reflects their normal hours, plus reasonable notice of shifts and compensation for late cancellations.

• Tackle "fire and rehire" and strengthen collective redundancy protections, supported by a statutory code, with the detailed remedies currently out for consultation.

• Extend employment tribunal time limits from three months to six months for most claims, which Acas expects to take effect in 2026.

• Reform trade union and industrial relations law, including repealing parts of the Trade Union Act 2016 and updating the framework for industrial action, recognition and workplace access.

What this means for small employers

In practice, three things matter most for small businesses:

1. Unfair dismissal protection will still move earlier – from two years to six months – even though day-one protection has been dropped.

   That will pull many more people into scope of unfair dismissal law and will demand clearer probation, performance and record-keeping.

2. Costs and admin around sickness, family leave and insecure work are still coming, with day-one sick pay and paternity leave due from April 2026.

   Further measures on zero-hours contracts and predictable work are expected from 2026–2027.

3. The detail will sit in secondary legislation, which is where issues like guaranteed hours, treatment of seasonal staff, compensation for cancelled shifts and the precise industrial relations rules will be decided.

   The government has promised "full, fair and transparent" consultation with business and unions on that detail.

How business and unions are responding

Six business organisations that have been in the room with ministers and unions have issued a joint statement welcoming the move to a six-month qualifying period as the basis for "initial acceptance" of the Bill:

• British Chambers of Commerce

• CIPD

• CBI

• Federation of Small Businesses

• Recruitment and Employment Confederation

• Small Business Britain

They describe the six-month threshold as "simple, meaningful, and understood within existing legislation".

However, they flag ongoing concerns about how the Bill will deal with guaranteed hours contracts, seasonal and temporary workers and industrial action thresholds in secondary legislation.

They also want clear guidance for employers and proper resourcing for the new Fair Work Agency and the tribunal system.

On the union side, the TUC's official position up to now has been that a six-month qualifying period would still leave more than two million workers at risk of unfair dismissal.

Following the announcement, news reports quote TUC general secretary Paul Nowak saying the priority is now to get rights such as day-one sick pay onto the statute book from next April and secure Royal Assent as quickly as possible.

Enterprise Nation's view

Daniel Woolf, Enterprise Nation's head of policy and government relations

"Small businesses will welcome today's move away from day-one unfair dismissals. A six-month qualifying period is a more workable landing zone and it's right that ministers have listened.

"But the wider Employment Rights Bill still amounts to one of the biggest expansions of employment regulation in a generation, and many of the remaining proposals could hit small employers hardest.

"Day-one sick pay and paternity leave, longer tribunal time limits and tougher dismissal rules all add up."

"Unless the secondary legislation is designed with small firms front and centre, there's a real risk founders respond by hiring less, using fewer permanent roles and scaling back opportunities.

"Enterprise Nation supports fair treatment and predictable work. What our 150,000-strong community needs now is simple, practical rules, phased implementation and clear guidance that works for a five-person business as well as a FTSE 100."

Summary

For now, the signal from government is clear.

The headline offer on day-one unfair dismissal has been watered down, but the direction of travel is still towards stronger floors on sick pay, family leave and insecure work, backed by tougher enforcement and longer time limits.

The real question for this Bill now is whether those ambitions can be translated into rules that a five-person firm can understand and apply without thinking twice about hiring in the first place.

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