When it took the keys to Number 10 in July 2024, the new Labour government made improving rights for employees a key priority. It was no surprise, then, that three months and six days into the government’s tenure, a new Employment Rights Bill was introduced into parliament.
The bill brought forward many proposals that had been promised in Labour’s manifesto, including an end to zero-hours contracts, new redundancy rights, changes to trade union law, and significant amendments to the law regarding dismissals.
And it’s this last category that we’re interested in here, as the bill specifically proposes banning “fire and rehire” and “fire and replace” practices and, importantly, removes the two-year qualifying period before an employee gains unfair dismissal protection.
Such dismissals are known as ‘short service dismissals’ and have been abused by some employers who dismiss staff just before the two-year bar. Nothing will change in relation to automatic dismissals, which are proscribed in law for dismissals based on pregnancy, maternity leave, trade union membership, whistleblowing, asserting a statutory right (say, requesting flexible working), or discrimination based on protected characteristics (race, sex, disability, etc.).
If the bill is enacted, employees will have the right from day one not to be unfairly dismissed. The bill recognises that employers need some protection too against bad hires. Consequently, there is likely to be some form of process to allow a ‘light touch’ dismissal during an initial probationary period. However, this period is as yet undefined, but the government is thought to prefer nine months. This period will not apply to redundancies.
But what will the new unfair dismissal landscape mean in practice?
Well, the change is big. Consider that since the right to claim unfair dismissal became law in 1971, the qualifying period to bring such a claim has ranged from six months to two years. It has never been a day-one right.
People Management – the magazine for the CIPD, the professional body for HR – says “a day-one right to unfair dismissal has significant consequences for businesses.”
It adds that there will be a need to educate staff on the new rules and to ensure that hiring is done correctly the first time, especially as the probationary period may not be very long. Employers will also need to be aware of the ‘have-a-go’ employee who seeks to capitalise on the legislation. Employers may also want to consider (greater) use of settlement agreements that effectively buy out the chance of litigation.
And employers are going to be more careful and restrictive. A May 2025 report from the Institute of Directors referred to an October 2024 survey that it ran on the topic. It detailed comments from members including: “… we take a chance with some slightly unusual candidates who on paper may not fit the job spec. This is often very successful – but in around 25% of cases we do have to let them go. This [policy] will tighten up our recruiting culture and will lead to marginalised candidates not getting a chance.” and “… recruitment mistakes are not uncommon, so our business works hard to make good decisions and to unravel problems in a fair way. These new proposals will make that more risky so we are less likely to recruit staff or create jobs.”
However, an October 2024 report from the Institute for Public Policy Research (IPPR), written in conjunction with the Trades Union Congress and opinion-monitors Persuasion UK, found that “a significant majority of managers (66%) think giving employees protection from unfair dismissal … on the first day of employment would have a positive impact on their business.”
The IPPR reckons that the change would “make employees healthier, happier and more engaged,” and would “provide employees with more security and predictability in their lives.”
The change to unfair dismissal law might, on paper, seem to help employees, but in reality, it may affect those candidates on the fringe of the labour market who might ordinarily struggle to find work.
Only time will tell what the change will bring. And for this part of the bill, we will have to wait until 2027.