Under the umbrella of The Employment Rights Bill (the Bill) the Labour government had promised the biggest upgrade to worker rights of our generation, the most famous of the reforms to be the abolition of the requirement for employees to have two years’ service in order to bring a claim of unfair dismissal. Labour promised day one rights to bring unfair dismissal claims. However, over the last few months there has been much parliamentary “ping-pong” over this issue as a result of the House of Lords refusal to accept day one rights and insistence on a six-month qualifying period instead. On 27 November, the government finally accepted the Lords’ position. Instead of immediate protection from an unfair dismissal, employees will now be able to bring a claim after 6 months’, instead of the current two years’.
In the UK, employees currently need two years’ of continuous service with their employer to qualify for the right to claim ordinary unfair dismissal under the Employment Rights Act 1996. This means that if an employee is dismissed before completing two years’ of service, they generally cannot bring a claim for unfair dismissal. However, there are exceptions where no minimum qualifying period applies, for example, if the dismissal is due to a discriminatory reason, whistleblowing, for asserting a statutory right or related to a health & safety reason. In those cases, the employee can claim unfair dismissal regardless of their length of service.
As part of the Labour Government’s Manifesto pledge, they promised day one rights for all employees to bring a claim for unfair dismissal – removing the current two year service requirement. However, with the Lords digging its heels in, the government u-turned last week and agreed to a six-month qualifying period. However, it also announced that it was planning to ‘lift’ the cap on compensation – but failed to provide any detail of what this meant.
The government has also confirmed that it is committed to protecting this change by making sure that the unfair dismissal qualifying period can only be amended through primary legislation. This will make it more difficult to amend in the future. Previously the qualifying service could be changed through a statutory instrument which is a simpler process.
The government’s press release on 27 November in which they announced the U-turn on qualifying service also mentioned an intention to lift the cap on compensation. This came as a surprise addition and led to significant speculation as to what this means.
Under the current regime, for any successful unfair dismissal claims, compensation for unfair dismissal is limited to (the lower of) 52 weeks’ gross pay or a statutory cap (currently £118,223).
This does not apply in discrimination or whistleblowing claims – where compensation is uncapped.
Commentators and practitioners are currently debating what this means for ordinary unfair dismissal compensation. Would it mean that there is no longer a cap on compensation? Or does it remove the 52-week rule but keep the statutory cap?
It is reported that Neil Carberry OBE (who was present when this was debated) has clarified that this is likely to mean that the 52-week cap will be removed but the maximum award (currently £118,223) will remain. The effect of this will be that those earning above £118,223 will be unable to claim more than this, however, those earnings less than this will be able to claim up to the cap (of £118,223). This could result in significantly higher compensation for lower-paid employees than under the current regime and will be a concern for many employers.
We await further clarification on this.
The governments original proposal provided for an ‘initial period’ of employment during which a ‘light touch’ process would be followed – the government had expressed a preference for this to be 9 months’. Whilst not entirely clear, it is expected that, now that the government has accepted a 6-month qualifying period, the light-touch process will no longer be relevant.
The Lords’ six-month proposal (in addition to the usual exceptions including for discrimination claims) included a new exception – where the dismissal is for a spent conviction.
In terms of timing of the reforms, day one unfair dismissal rights were originally scheduled to be effective in 2027. As there is no longer a need for consultation on the ‘initial period’ of employment, it is likely that a six-month qualifying period will come into force sooner.
This concession from the government was preceded by significant opposition to the proposed reform. On 11 November 2025 the ONS reported that the UK unemployment rate had risen to 5% for the three months to September 2025 – the highest it has been since late 2020 at the height of the COVID pandemic. Many expressed concern that providing individuals with day-one rights or a shorter qualifying period would prove to be another nail in the coffin of the economy. There was also concern that employers could be more cautious about hiring new recruits, and this coupled with already rising unemployment rates, was a concern.
This, when considered in light of the already stretched Employment Tribunal Service, (which is currently seeing an unprecedented amount of backlogged claims) could put more strain on an already struggling service. However, despite these concerns, the six-month qualifying period has been well received as a good compromise between day one rights to unfair dismissal and the current two-year qualifying period and offers fresh opportunities for employers to strengthen their employment practices.
Managers will need to be trained to identify any performance or conduct concerns earlier and address them with the employee. They should also ensure that they have good record-keeping of any such concerns and their discussions.
To book an appointment or to discuss this further, please contact the Employment Law team on [email protected], 01732 770660
This article is for general information purposes only and does not constitute legal or professional advice. All information was correct at the time of publication; however, the law may have changed since then. For the most up-to-date advice, please contact us directly. We do not accept any responsibility or liability for actions taken based on the information in this article.
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