The Employment Rights Bill, introduced in October 2024, significantly transforms UK employment law, particularly with respect to unfair dismissal rights. The most important of such changes include the abolition of the two-year qualifying period for unfair dismissal claims and tighter restrictions on ‘fire and rehire’ practices.
The proposed changes will significantly impact both employers and employees. Here, we outline the two key issues.
Abolition of the two-year qualifying period
Currently, UK employees need to complete a two-year qualifying period to gain the right to claim unfair dismissal. The two-year qualifying period allows employers to assess new hires without the risk of immediate legal challenges for unfair dismissal. Since the right to claim unfair dismissal was introduced in 1971, the qualifying period to bring a claim has varied between six months and two years but has never been a ‘day one’ right – until now.
The Bill abolishes the qualifying period, granting employees unfair dismissal rights from the first day of employment. This change allows employees to challenge their dismissal without the previous time constraints, aiming to enhance job security.
The ‘initial period of employment’ (IPE)
As an alternative to the qualifying period, the Bill introduces the concept of an “initial period of employment” (IPE) – basically, a statutory probation period. The IPE aims to strike a balance between granting employees unfair dismissal rights from day one and allowing employers some flexibility to correct recruitment decisions they regret. The precise time frame of the IPE has yet to be finalised but is expected to be nine months.
The proposal is that, during the IPE, employers would need to show that dismissals are linked to specific reasons such as the employee’s conduct, ability to do the job, conflicts that make the working relationship unsustainable or legal restrictions.
However, employees would be fully protected against unfair dismissal in redundancy cases from their first day of employment.
Compensation for an unfair dismissal during this initial period will probably be lower, but how much lower is unknown.
An end to ‘fire and rehire’?
‘Fire and rehire’ refers to a practice where employers dismiss staff and re-engages them under new terms and conditions less favourable to the employee.
The Bill introduces stricter rules to limit this practice. Under the new legislation, dismissals for refusing to accept changes to terms and conditions will be unfair. Furthermore, if an employer dismisses an employee in order to replace them with someone on different terms, this will automatically be deemed unfair.
There is an exception for businesses experiencing serious financial difficulties that threaten their survival. However, before dismissing the employee, firms will have to demonstrate that they have acted fairly and explored all reasonable alternatives.
Implications for employers
The new laws are not expected to come into force until next year so there will be some time to prepare.
The abolition of the two-year qualifying period means that employers will have to have clear and fair reasons for dismissing employees from their very first day on the job. The IPE will provide some balance and flexibility, but the detail – the precise rules and timeframe – will not be finalised for a while, following consultation. Whatever that detail will be, employers should look to examine their hiring, probation and dismissal processes to ensure they meet the tougher new standards.
Tighter rules around ‘fire and rehire’ also mean that businesses must handle changes to employment contracts carefully. It will be more important than ever to have open and honest consultation with employees to seek their consent.
Failure to follow these new legal requirements could have serious consequences for employers. If the new rules are not followed, dismissals will be unfair. Unfair dismissal claims can be costly in terms of compensation awarded, settlements and defending legal proceedings.
How 3CS can help
The changes being introduced by the Employment Rights Bill highlight the importance of being proactive. Our expert employment solicitors are here to guide you through these significant changes. We can advise you on the Bill and its impact on your business practices. Please feel free to contact us so that we can discuss these changes further.
