The Employment Rights Bill: What We Know (and Don’t Know) So Far... Part I

WHAT ARE THE REFORMS TO UK EMPLOYMENT LAW?

The Employment Rights Bill proposes around 28 reforms to current UK employment law. Key reforms include day-one unfair dismissal rights, changes to zero-hours contracts, collective redundancy rules, and the abolition of fire and rehire practices. The Bill also aims to enhance family-friendly rights, strengthen harassment protection, and extend statutory sick pay. As the Bill is still progressing through Parliament, its final provisions are subject to change, and many details will be clarified through secondary legislation. Employers should stay informed about these changes to prepare for new obligations once the legislation becomes law.

WHAT DOES THE BILL MEAN FOR UNFAIR DISMISSAL?

The Employment Rights Bill introduces significant changes to unfair dismissal claims. Currently, employees need at least two years of continuous service to claim ordinary unfair dismissal, with exceptions for whistle-blowing, discrimination, and certain statutory rights (which do not require a minimum length of service). Under the new Bill, no minimum service period will be required to make an unfair dismissal claim, subject to a new "light touch" dismissal procedure. This change is expected to come into force no earlier than Autumn 2026. The Bill clarifies that employees cannot claim unfair dismissal before starting work, although some rights, like whistleblowing and discrimination, accrue at the recruitment stage. This reform will significantly expand the scope of employees eligible to claim unfair dismissal.

DO THEY REALLY MEAN “DAY ONE” RIGHTS?

The new Employment Rights Bill introduces "day one" rights for unfair dismissal, but with a significant limitation called the "initial period of employment," likely to be nine months. If dismissal occurs within this period or within 3 months of the last day of the initial period, and the reason is capability, conduct, statutory restriction, or some other substantial reason, and the employer follows a "light touch dismissal procedure," no unfair dismissal claim can be made. This effectively means employees could be dismissed lawfully up to the one year of service point, provided the dismissal is for one of the permitted reasons and follows the “light touch procedure”. Redundancy or reorganisation dismissals within this period still allow for unfair dismissal claims, however. The exact details of the "light touch dismissal procedure" are yet to be clarified.

WHAT DOES THIS MEAN FOR FIXED TERM CONTRACTS?

• Unfair Dismissal Liability: There’s no escaping unfair dismissal liability within the initial period if you’re not renewing a fixed-term contract. This includes dismissal for redundancy and reorganisation. Employees dismissed for these reasons can claim unfair dismissal, as these are business decisions, not personal to the employee.
• Dismissal for Capability, Conduct, or SOSR: If an employer dismisses an employee for capability, conduct, or some other substantial reason (SOSR) within the initial period and doesn’t follow the new procedure, the employee can make a claim to the tribunal.
• Potential Awards: The current cap for unfair dismissal awards is up to £118,223 or 12 months’ wages, whichever is lower. Successful claims for capability, conduct or SOSR dismissals within the initial period will have a new, separate cap, although there is no clarity on what this is yet.

WHAT IS THE IMPACT OF THE NEW RIGHT?

• Increase in Employment Claims: There’s likely to be a marked increase in employment claims to the Tribunal, though these claims might be simpler and less legally complex than the typical claims to date. Currently, dismissed employees with less than 2 years of service often bring whistleblowing or discrimination claims (as an unfair dismissal claim is not available to them), which are complex. The new right allows for simpler unfair dismissal claims, potentially reducing court time.
• Reduced Recruitment: Employers might be more hesitant to recruit, fearing legal liability if they need to let employees go early without flexibility.
• Probationary Periods: Employers can still set their own probationary periods, distinct from the initial period, for benefits and other conditions.
• Employees with Less than 2 Years Service: The impact on employees who don’t have 2 years of service when the Bill becomes law remains to be seen.

WHAT CAN EMPLOYERS DO TO PREPARE FOR THE NEW UNFAIR DISMISSAL RIGHTS?

• Enhance Recruitment Procedures: Implement more robust pre-employment screening, ask detailed questions about employment gaps, and diligently follow up on references to reduce the risk of unsuitable hires.
• Utilise Early Reviews and Probation Periods: Conduct early reviews and use probation periods effectively to assess employee performance. Address any signs of poor performance promptly.
• Review Contracts and Policies: Update contracts and policies, especially disciplinary, capability, and performance policies. Ensure procedures apply to all employees, with a "light touch" procedure for those in the initial period and a full procedure for others, including those dismissed for redundancy or reorganisation (regardless of whether or not they’re in the initial period).
• Educate Management: Train senior management and hiring staff about the new rights. Ensure they understand the law and the need to tighten recruitment and management procedures.