The UK government has reversed its contentious plan to grant all new employees protection from unfair dismissal from the first day of employment. This decision follows months of warnings from industry leaders and significant political resistance from the House of Lords.
The Department for Business and Trade (DBT) announced on Thursday that under revised proposals, protection will now be effective after six months of employment. This policy shift forms part of the government’s flagship Employment Rights Bill, which faced delays in the House of Lords, threatening the passage of other measures within the bill.
Currently, employers can dismiss staff without providing a reason within the first two years of employment, a measure intended to encourage hiring and reduce the risk of costly legal disputes. Labour had proposed abolishing this provision entirely as part of its pre-election manifesto, alongside other significant employment law reforms such as banning zero-hours contracts and prohibiting ‘fire and rehire’ practices.
The proposal to extend rights from day one, especially concerning unfair dismissal, met with strong opposition from businesses, who argued it would hinder their ability to recruit. The reversal is likely to be welcomed by major industry bodies, collectively known as the ‘B5’, who have consistently urged ministers to prioritise economic growth over the proposed protection laws.
The DBT reached its decision after a series of constructive meetings with unions and business representatives. Business groups involved in the discussions expressed approval of the decision, stating it would enable businesses to hire confidently while still protecting workers.
“Businesses will still have concerns about many of the powers contained in this Bill. This includes guaranteed hours contracts, seasonal and temporary workers, and thresholds for industrial action,” they added.
Despite the decision, new Business Secretary Peter Kyle had previously promised to implement the package in full at September’s Labour Party conference, a stance he later softened. Addressing the CBI’s annual conference, Kyle stated his commitment to passing the bill, acknowledging frustrations over misinterpretations of the bill’s implications.
Rupert Soames, the outgoing chair of an industry body, criticised the package’s inconsistency with the government’s goals of boosting youth employment and economic growth. He highlighted concerns over increased employment costs and regulatory burdens introduced by the bill.
The House of Lords had stalled the workers’ rights measures for several months, warning that the changes, including those to zero-hours contracts, would stifle employment. This impasse raised fears that the bill might not be ratified by parliament in time for implementation in April.
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