Unfair dismissal and ‘day-one’ right

What are the changes to unfair dismissal rights?

The right will apply only to employees and not workers, so actually, there is no change to the current scope of protection. The right will apply only to employees who have already started work.

As mentioned above, the Government is proposing to introduce the “initial period of employment” (IPE) and during this IPE, employers will be able to operate a “light touch” dismissal process. However, this will only apply where the dismissal is related to the employee’s conduct, capability, SOSR related to the employee or a statutory restriction and notably not to redundancy or restructuring. We don’t have any details about what that “light touch” looks like but in the Government’s Next Steps document (also published on 10 October 2024), it sets out that the process is likely to involve a meeting with the employee to explain the reasons for their dismissal, possibly alongside having the right to be accompanied at the meeting. That document also states that the Government’s preference is for the IPE to be nine months. However, there will be a consultation exercise in 2025 about the details and further legislation. There may also be a review of the ACAS Code of Practice on Disciplinary and Grievance Procedures. Interestingly, on 27 November 2024, an Amendment Paper to the Bill was published and this includes Government amendments, which are likely to be progressed. One of these is to increase the time limit to bring Employment Tribunal claims from three to six months. Non-Government amendments, less likely to be progressed, include a proposal that the IPE must be not less than three months and not more than nine months from the day on which the employee starts work.

Whatever the period of the IPE, the modified, “light touch” process can apply even where notice of termination was given to the employee on the last day of the IPE as long as that notice expires within three months of the end of the IPE. If the notice expires more than three months after the end of the IPE then the test for ordinary unfair dismissal will apply and an employer cannot rely on any modified, “light touch” dismissal process.

Before the Bill was published, there was a lot of commentary about a “statutory probation period”. Interestingly, the Bill does not refer to this phrase at all and what we have instead is the IPE. Employers will still be able to have contractual probationary periods that are longer (or shorter) than the IPE. For instance, in some roles, a 12 months’ probationary period is not uncommon. In many organisations, employees only become entitled to certain benefits (PHI schemes, bonuses for example) on successful completion of a probationary period and again, that may be 12 months. Employers will be entitled to maintain their own probationary periods but they will have to draw distinctions between dismissals during the IPE (when the “light touch” process applies) and dismissals outside the IPE even if they still fall within a contractual probationary period.

Economic analysis of the Bill and impact assessments

In our most recent article about the Bill Employment Rights Bill recent developments we mentioned that on 21 October 2024, the Government published a comprehensive economic analysis of the Bill, a summary impact assessment and 23 individual impact assessments on specific policy proposals contained in the Bill.

On 21 November 2024, the Regulatory Policy Committee published an opinion that includes an overall fitness-for-purpose (red/green) rating on the Bill. The overall assessment for the Bill’s impact assessment is “not fit for purpose”. The RPC has also assessed eight of the 23 impact assessments as “not fit for purpose”.

In relation to unfair dismissal day-one rights, which is red-rated, the RPC said that the Government’s evidence and analysis supporting the rationale for intervention is insufficient.

The impact assessment said that…

The RPC said that the impact assessment needs to address why options of reducing the qualifying period to points in between the current two years and proposed day one would not provide an appropriate re-balancing, and/or address options relating to probation periods. The impact assessment also needs to address the potential indirect and dynamic impacts on the labour market, such as how day-one rights might affect recruitment, employee turnover or retention rates.

As the RPC says in its opinion, “Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis, to understand the overall impact on employment, wages and output, and particularly, the pass-through of employer costs to employees”.

In the meantime, the Business and Trade Committee has launched a call for evidence to assess whether the Bill will achieve the Government’s stated aims of upgrading workers’ rights, tackling poor working conditions and benefitting businesses and workers alike. The deadline for submissions is 6 December 2024 and further details can be seen here.