On 27 November 2025, the Government announced that it was dropping its plans to make ordinary unfair dismissal claims available from day one of employment.
Instead, the Government has said that following constructive conversations with unions and businesses, it will introduce an amendment to the Employment Rights Bill (‘ERB’), which will reduce the current two-year qualifying period before an employee gains protection from ordinary unfair dismissal down to six months.
The Government also announced it will:
- Make sure that the unfair dismissal qualifying period can only be changed in the future by primary legislation, making it more difficult for future governments to change (currently the qualifying period can be changed quickly in secondary legislation); and
- “Lift” the cap on compensation for unfair dismissal (currently the lower of 52 weeks’ pay or £118,223)
There is much speculation about how this might work, pending the Government providing more details (which it is expected to before 8 December 2025).
- The Government has not explained what is meant by saying it will “lift” the compensation cap. It could mean that the cap is removed entirely, or that it is increased, or that only part of the cap (such as just the 52-weeks’ pay element) will be removed. Before the election, in an earlier version of what became Labour’s final ‘Plan to Make Work Pay’ which formed part of its manifesto commitments, Labour had promised that it would remove caps on compensation, though that reform did not appear in the ERB – at least until now.
- It is also unclear whether the concept of the initial period of employment (‘IPE’), a new statutory probationary period being introduced as part of the unfair dismissal reforms in the ERB, will be retained. The IPE concept was preserved in the amendments put forward by the House of Lords reducing the qualifying period to six months, but current indications suggest the IPE will be removed from the ERB. Certainly, removing the IPE concept would be more straightforward.
- Finally, reports suggest that by simplifying the reforms to unfair dismissal, the Government could bring the change into effect earlier, perhaps even in early 2026. On the Government’s current implementation roadmap (see our article here) unfair dismissal had been one of the last reforms in the ERB to come into force, expected in 2027.
For now, we wait for further developments. The ERB is due to return to the House of Commons on 8 December, and has been scheduled to return quickly to the House of Lords on 10 December. It has been reported that the change to unfair dismissal was made to avoid further delays in the ERB becoming law, and so the Government appears to expect that the ERB will now pass before Christmas. If that happens (although of course there is still scope for the House of Lords to send the ERB back to the House of Commons on 10 December) the Government has confirmed it will aim to keep to the current implementation timetable. We will be updating our Reform Hub with developments as they happen
