Home / Unfair Dismissal – From a Day 730 Right to a Day 1 Right
25th October 2024
Sally Bird, Partner
Alongside the moves to severely restrict the ability to Fire and rehire, the move to abolish the qualifying period for unfair dismissal is right up there amongst the most radical changes that the new Labour government will introduce that are most likely to concern many of our clients. The stated policy intent is to strengthen employment rights and “end one-sided flexibility in the workplace” with the object of increasing job security for employees in England and Wales. The Office for National Statistics estimates that around 9 million employees have been working for their employer for less than 2 years. The changes are made to help to ensure that newly hired workers are not fired arbitrarily and to drive up standards in workplaces. That is laudable but as we know, recruitment is far from an exact science and many smaller businesses do not operate thorough recruitment practices to thoroughly test an applicant’s suitability. Equally many businesses are not well-versed in performance management.
I have often referred to the qualifying period for unfair dismissal as one of the “golden rules” of employment. When advising on most employee relations issues, one of the first questions we ask is what is the employee’s length of service, because that has such a significant impact on the advice we then provide. Where an employee has less than two years’ service then often the welcome advice to be given to employers is that the employee could be dismissed without a statutory reason needing to be given or a detailed process needing to be followed. Of course there are exceptions, including in more complex situations involving discrimination, trade union membership or whistleblowing, or where disciplinary or capability procedures had contractual status, giving rise to potential claims for breach of contract if not followed. However, it is fair to say that in many cases an employee with less than 2 years’ service could be dismissed with relative ease. Of course the effect of this in reality is that many employees have no security or protection until they have been employed for two years. Those involved with tribunal claims for unfair dismissal and looking at schedules of loss will be familiar with the award for “loss of statutory rights” of around £500 which is a mechanism for compensating an employee for losing their statutory right to claim unfair dismissal and having to work for a further two years before this was attained again.
Since the introduction of the laws of unfair dismissal back in the annals of time, there has always been a qualifying period for this right. Over this 53 year period, with changes in government this has fluctuated between 12 months and 24 months, once dropping to 6 months. Under the last Labour government, it was 12 months, but it was increased by the last Conservative government to 2 years, the longest qualifying period that has applied. So the announcement that there will now be NO qualifying period of service is radical indeed and has sent shivers down the spine of many small business owners and has been received negatively by the Federation of Small Businesses.
The qualifying period of two years is repealed. Labour then say however that they will be legislating to introduce “fair and proportionate processes for dismissal in “initial periods” of employment.
An “Initial period” is another way of referring to a statutory probationary period. Most employers will already include provisions for probationary periods in their contracts of employment, and these are used to determine a new employee’s suitability and compatibility to their role, providing a right to terminate -usually on a shorter period of notice which can be as low as 1 week. On successful completion of the probationary period, the employee becomes entitled to a longer period of notice of termination, and this can often be the gateway to entitlement to additional benefits.
The intention is to introduce a “lighter touch” approach to dismissal during this “Initial period”. The government has stated that its preference is for this initial period to be 9 months. In my experience most probationary periods are set at 6 months, and typically include a right on the part of the employer to extend the period by up to a further 3 or sometimes 6 months. Now 9 months is not a million miles away from 12 months -the qualifying period for unfair dismissal under the last Labour government. Whilst it would have been easier to simply reduce the qualifying period to 9 months, the proposed new rules will entail a requirement for a fair reason and a basic process to be followed, which will add to the burden and cost of employing new staff.
The draft bill modifies the standard and well worn test for unfair dismissal -so where the effective date of termination falls on or before the last day of the Initial period, a “lighter touch” test is applicable. What this means is that an employer must firstly be able to show that the reason for dismissal was one of 4 out of the current 5 statutory fair reasons ( conduct, capability, contravention of a statutory enactment or some other substantial reason “relating to the employee”). Interestingly, this excludes redundancy -so the right to challenge the fairness of a redundancy dismissal would truly be a day 1 right. There is then a process that needs to be followed entailing holding a meeting with the employee to discuss concerns with a right for the employee to be accompanied.
Whilst this is lighter touch, it is still some distance from having a qualifying period threshold before which employers are able to dismiss without following a process or having a fair reason. As well as ensuring that recruitment and performance management processes are more rigorous, employers will need to comply with the requirements set out for these statutory probationary periods, by being able to identify a fair reason and holding a meeting to discuss concerns. If the period remains set at 9 months, then employers would be well-advised to set a probationary review at 6 months to then allow an additional period for improvement if deemed appropriate.
Employers retain the right to run contractual probationary period of any length they choose, as well as to choose what notice periods should apply and entitlements the employee can access during or after that period. Some provision may also be made for periods to be longer than 9 months for “technical roles”.
Following the introduction of these changes, it is highly likely that there will be a higher volume of claims made to Employment tribunals, which in many areas are already over-burdened. It is very unlikely that fees will be re-introduced , so short-serving employees have no disincentive against claims.
One positive consequence could be a reduction in the volume of more complex claims like whistleblowing and discrimination which are sometimes brought by employees when they are unable to bring a claim of unfair dismissal due to not having sufficient qualifying service. If employers adapt and ensure that some process is followed then this is also likely to improve employee relations and make dismissal less messy.
Alongside this, employees will have the right to request written reasons for their dismissal once the statutory probationary period has concluded.
The government also intends to consult on whether the amount of compensation that an employee could be awarded for unfair dismissal during this initial period should be lower, which may go some way to easing concerns of employers.
It has been confirmed that these reforms would take effect no sooner than autumn 2026, so there is a long run in period, during which these rights may be subject to change following consultation. Our advice to employers is to make use of this time to refine and improve recruitment practices and performance management processes, alongside carrying out a review of existing provisions for probationary periods -including their length, how they operate in practice and whether they would meet the new requirements.
We offer expert advice and training on recruitment performance management and drafting and operating probationary periods. Please contact the employment team for If you would like any further advice.