Unfair dismissal will become a day one right
The current two year qualifying period to bring an ordinary unfair dismissal claim will be repealed.
Implementation status
Part of the Employment Rights Bill.
Awaiting consultation.
Will not come into effect before "Autumn 2026".
- Action
Review recruitment processes to ensure they are robust in identifying the right candidates; care must be taken not to inadvertently discriminate.
Ensure managers are trained on when unfair dismissal rules apply, and the relevant legal considerations i.e. will the new modified process (see below) or a fair process under existing principles apply. Managers should also be alert to the risks of automatic unfair dismissal claims.
Consider what protections may be required to protect business secrets, confidential information and trade connections for key employees who may be more inclined to move to a competitor given greater statutory protection.
- In detail
The existing two year qualifying period to bring an ordinary unfair dismissal claim is removed.
A provision is included to ensure that employees who have not yet started work but entered into an employment contract do not gain ordinary unfair dismissal protection. Automatic unfair dismissal rules will still apply (e.g. alleged whistleblowing).
- Impact
The two year qualifying period still applies until this proposal is implemented. In some instances (e.g. in whistleblowing cases) it is already the position that no statutory qualifying period applies.
The government wants to ensure that newly hired workers are not fired without cause or reason and it "will help drive up standards in workplaces". The government also intends to address concerns that the current system means "people are less inclined to move jobs, posing risks to productivity".
The right not to be unfairly dismissed still only applies to employees; but may be extended down the line when the new government progresses its proposals around employment status.
A "modified dismissal process" during an "initial period"
With unfair dismissal rights becoming a day one right, a modified dismissal process will be introduced during an "initial period of employment" which will apply to dismissals for specific reasons.
Implementation status
Part of the Employment Rights Bill.
Amendment proposed to the Bill at Committee stage that the "initial period of employment" must be between three and nine months from the day on which an employee starts work, with the actual period to be set out in regulations made under the Bill.
Awaiting consultation and regulations to provide more detail, including how it interacts with the Acas Code on disciplinary and grievance procedures.
Will not come into effect before "Autumn 2026".
Additional intention to consult on calculating compensation for a successful claim in the initial period, with consideration given to tribunals "not being able to award the full compensatory damages currently available".
- Action
Audit the current approach to probationary periods. Consider how they are used and whether they are monitored. Consider what training and support is provided to new joiners during their first year of employment.
Put in place training for managers on understanding when the new modified procedures apply (and when they do not e.g. redundancy) and the process to be followed. Consider what the position will be for employees engaged on repeated short-term engagements.
Consider any further company specific procedural safeguards to manage litigation risks, for example, where the reason for dismissal is in dispute and/or the employee alleges discrimination, whistleblowing etc.
- In detail
The requirement for an employer to follow a fair process to avoid unfair dismissal liability will be modified where a dismissal occurs during an initial period of employment, or where the employer gives notice of termination before the end of the initial period of employment and the effective date of termination is within 3 months of the last day of the initial period of employment.
The dismissal must be for conduct, capability, a statutory bar or some other substantial reason which "relates to an employee".
Regulations will specify what the initial period of employment is. An amendment has been proposed to the Bill to provide that this period must be between three and nine months from the day on which the employee starts work, with the actual period to be set out in regulations. Regulations may also specify where two or more periods of employment are to be treated as a continuous period for these purposes.
The government has indicated it will be "a light-touch process"; as a starting point it "is inclined to suggest [the modified dismissal process] should consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague)".
Employers will still be able to operate shorter contractual probationary periods. However, once the qualifying period is removed, an employer will need to establish a "fair reason" and follow the modified procedure or fair procedure under ordinary principles to avoid unfair dismissal liability.
- Impact
Under current principles, employees made redundant during the initial period would have a right not to be unfairly dismissed, once the qualifying period is removed. The current wording of the Employment Rights Bill also suggests that this will also be the case on dismissals for some other substantial reason which do not relate to the employee.
The modified procedure does not apply to claims falling within the existing automatic unfair dismissal rules where there is no qualifying service requirement, such as whistleblowing.
Restrictions on changing terms and conditions (fire and re-hire)
The government is seeking to end the "unscrupulous" practice of fire and re-hire. On current drafting, the Bill provides that it will be automatically unfair to dismiss an employee for not agreeing to a variation of their contract or where a variation is proposed to allow for an employer to re-hire the employee or someone else to carry out substantially the same job on a varied contract. There is an exception where an employer can show that the variation of contract was because of "financial difficulties" affecting its ability to carry on the business and it could not have "reasonably avoided" making the variation. Where the exception applies, ordinary unfair dismissal rules will still apply.
Implementation status
Part of the Employment Rights Bill.
Further detail expected in regulations (and amendments to the current Code of Practice where it is retained).
"The majority of reforms will take effect no earlier than 2026".
A consultation on increasing the maximum protective award for a failure to comply with the collective consultation rules and introducing a right for employees to apply for interim relief closed December 2024 (awaiting response). Additional changes may be made to the Bill by way of amendment.
- Action
Where a fire and re-hire scenario is in contemplation, consider the reputational and employee relations impact, which may be heightened in light of the current proposals. Apply the current Code of Practice on dismissal and re-engagement (and watch out for the potential impact on protective awards, in addition to unfair dismissal compensation, which applies January 2025).
Review and update existing contractual variation clauses and consider their inclusion where not currently used. However, these clauses can be difficult to enforce, particularly for significant changes and in a hostile scenario.
In future, proposed changes to terms and conditions will need to be subject to careful planning. Any proposals are likely to be closely scrutinised and may lead to expert evidence on finances being put before an Employment Tribunal. Potentially higher compensation costs for a failure to comply with collective consultation rules, where applicable, will need to be factored in.
- Remain alert to the potentially wider impact of the proposed reforms on changing terms and conditions outside of a typical "fire and re-hire" scenario. Case law will be important in understanding how the new provisions (including the exception) are interpreted.
- In detail
It will become automatically unfair to dismiss an employee where the reason or principal reason for the dismissal is either that:
The employer sought to vary the employee's employment contract and the employee did not agree to the variation; or
To enable the employer to employ another person or to re-engage the employee under a varied employment contract to carry out substantially the same duties as the employee carried out before being dismissed.
There is a statutory exception where the dismissal will not be automatically unfair if both the following are satisfied:
The reason for the variation was to eliminate, prevent or significantly mitigate the effect of any financial difficulties, which at the time of the dismissal were affecting or were likely in the immediate future to affect the employers ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business; and
In all the circumstances the employer could not have reasonably avoided the need to make the variation.
Where the exception applies, a tribunal will still need to assess whether the dismissal was fair in all the circumstances, with statutory provisions setting out matters to be taken into consideration including whether the employer has consulted with the employee and any trade union or employee representatives on the proposed contractual changes and whether the employer offered the employee anything in return for agreeing to a variation.
The government has published a consultation on tackling the abuse of the fire and rehire and collective consultation rules which seeks views on increasing the maximum protective award (from 90 up to 180 days or removing the cap altogether) and introducing a right for employees to apply for interim relief where either they have a claim for the protective award or they have a claim for unfair dismissal in a fire and rehire situation. Interim relief is currently only available for whistleblowing and trade union dismissals.
- Impact
The government is seeking to "provide effective remedies" to stop the "unscrupulous" practice of fire and re-hire "while also maintaining that businesses can restructure to remain viable, preserve their workforce and the company when there is genuinely no alternative". However, on the face of the current wording, the Bill would make automatically unfair the dismissal of any employee for refusing to agree to any variation of terms and conditions, express or implied; there does not necessarily need to be a proposal to dismiss with a view to re-hiring another employee.
- The statutory exception is extremely limited. It seems that Employment Tribunals would need to make findings on an employer's financial position, its ability to continue as a going concern and whether the contractual variation could reasonably have been avoided, leading to more complex, lengthy and costly proceedings.
A Code of Practice came into force on 18 July 2024, providing that fire and re-hire can be used where the employer "has participated in a thorough and open information-sharing and consultation process, as part of which it has genuinely considered any reasonable alternative proposals" but it should be considered "a last resort". Failing to follow the code is not a claim in its own right but can lead to an Employment Tribunal uplifting compensation in other claims (such as unfair dismissal) by up to 25%.
The government recognises the risk of employers making redundancies as an alternative to changing terms and conditions via fire and rehire "due to light or moderate financial pressure". However, given the longer-term implications to productivity etc., it expects "businesses to avoid making redundancies where possible".
In addition to the current consultation on strengthening the remedies for breach of the statutory collective consultation obligations, a statutory order now provides tribunals with the ability to apply an uplift or reduction to any protective award made in fire and re-hire cases with effect from 20 January 2025, where there has been a failure to follow the statutory Code of Practice which came into force in July 2024.
Redundancies and statutory collective consultation
The threshold for the collective redundancy consultation obligations (and notification to be made to the government) to apply will be calculated across a business rather than an establishment.
Implementation status
Part of the Employment Rights Bill.
"The majority of reforms will take effect no earlier than 2026".
A consultation on increasing the maximum protective award for a failure to comply with the collective consultation rules and introducing a right for employees to apply for interim relief closed December 2024 (awaiting response). Additional changes may be made to the Bill by way of amendment.
During 2025 the government will gather further views on strengthening the collective redundancy framework.
- Action
Removing the establishment requirement will have significant implications for multi-site employers; careful monitoring of proposed redundancies will be needed to determine when the statutory collective consultation threshold is met, and notification needs to be made to the Secretary of State. Clarification is needed on how the rules will apply to staggered redundancies.
Where an existing staff representative body exists, consider whether their mandate should be extended to cover potential redundancies. However, also consider that the impact on their time could become significant, as well as issues over whether they are best placed to act as "appropriate representatives" in the particular circumstances.
Factor in the potential for a significant increase in financial penalties and the availability of interim relief for employees where the statutory collective consultation rules are not strictly followed.
- In detail
The words "at one establishment" will be removed from the current statutory provisions; the threshold for the collective redundancy consultation obligations will be calculated across a business rather than a single establishment. It will also be removed from the statutory provisions providing for pre-transfer consultation on a TUPE transfer.
- A consultation seeking views on increasing the maximum protective award (from 90 up to 180 days or removing the cap altogether) and introducing a right for employees to apply for interim relief where either they have a claim for the protective award or they have a claim for unfair dismissal in a fire and rehire situation closed December 2024. Interim relief is currently only available for whistleblowing and trade union dismissals.
During 2025, views will be gathered on strengthening the collective redundancy framework. This will include consulting on doubling the minimum time limit from 45 to 90 days for starting consultation before the first dismissal takes effect, when an employer is proposing to dismiss 100 or more employees.
- Impact
Currently, where an employer proposes making 20 or more redundancies at one establishment within a period of 90 days or less it must consult on its proposal with representatives of the affected employees and notify the Secretary of State. Case law has held that an establishment is the local unit or entity to which workers are assigned to carry out their duties. Where an employer breaches the collective consultation requirements, an Employment Tribunal may make a protective award of up to 90 days gross pay per employee.
Removing the "establishment" requirement significantly widens the scope of employees who may trigger the collective consultation obligations (and the requirement to notify the Secretary of State on form HR1). Likewise, the proposed changes to the protective award and the availability of interim relief will add a significant financial risk to a collective consultation exercise.
Depending on the outcome of the government's review, potential future reforms around extending the time period before a first dismissal will likewise bring significant costs and risks for employers in terms of the length of the collective redundancy process and managing employee relations issues during this period.
Protection against dismissal for pregnant employees up a period following her return
In Make Work Pay, the government committed to making it unlawful to dismiss a woman "who is pregnant for six months after her return, except in specific circumstances".
Existing statutory provisions permitting regulations to be made about redundancy during or after a protected period of pregnancy or maternity leave (and likewise in respect of other types of leave, including adoption leave and shared parental leave) will be amended to enable regulations to provide protection in respect of "dismissal" throughout the same period.
Implementation Status
Part of the Employment Rights Bill.
Consultation will be carried out and further detail set out in regulations.
"The majority of reforms will take effect no earlier than 2026".
In relation to extending dismissal protection for those taking adoption leave and shared parental leave, a decision will be taken following the consultation on whether and/or how these powers should be exercised.
- Action
- Managers will need to be aware of who is protected, how the protection applies and for how long it applies and how this interacts with the new rules, applying from April 2024, which provide for those who are pregnant and those returning from specific types of statutory family leave to be given priority for suitable alterative employment on redundancies.
- Any extension of protection will reinforce the need for managers to ensure that performance concerns are managed appropriately and constructively (and without discrimination).
- As well as maternity, shared parental leave and adoption, the Bill would allow the new protections to apply to those who are on neo-natal leave and paternity leave following bereavement, both of which are not yet in force. We may see these new leave rights taken forward as part of the government's review of the parental leave system.
- In detail
- Existing statutory provisions which allow for regulations to make provision about redundancy during or after a protected period of pregnancy or maternity leave will be amended to enable regulations to provision for "dismissal" throughout the same period.
- Relevant statutory provisions in respect of other types of leave - adoption leave, shared parental leave, neonatal care leave (not yet in force) and bereaved parents paternity leave (not yet in force) - will likewise be amended.
- Impact
- Currently employees who are pregnant and for 18 months after childbirth, must be given first refusal of any suitable alternative employment on redundancy. These protections also apply to individuals on adoption leave or shared parental leave (subject to an individual taking a minimum amount of shared parental leave).
- No further detail is given on what regulations may be made under the revised power save for the government's stated commitment to ban the dismissal of pregnant employees for six months after their return to work except in specified circumstances. However, the impact assessment states that "for illustrative purposes, approaches that could be considered include retaining certain reasons for dismissal (e.g. conduct) and/or setting a certain standard within those reasons (e.g. gross misconduct), and/or considering when and how dismissals are defended".
- The impact assessment identifies that the policy might lead to a reluctance to employ women or lead to employers delaying dismissals until the protection period is over; "the consultation will be critical to finding the right balance between protecting women and preventing such unintended consequences".
