Unfair Dismissal
Unfair Dismissal
6 Month Qualification Period replaces Labour’s Plan for Day 1 Right
When the Labour Government came into power in July 2024, they promised a sweeping overhaul of worker protections, including granting the right to bring a claim for unfair dismissal from day one of employment if their employer had not followed a fair process to dismiss them. This change was to replace the existing 24 month (or 2-year) continuous service qualification to bring such claims to the attention of an Employment Tribunal.
However, in November 2025, that ambition was scaled back after business push back. The House of Commons and House of Lords have been going backwards and forwards with respect to what the qualifying period for Unfair Dismissal should be. Rather than a day-one protection, the government has compromised. The new plan grants unfair dismissal protection only after six months of employment.
Understandably, this adjustment has provoked strong reaction from unions, some Labour MPs, and from workers who had hoped for immediate protection. The Department for Business and Trade have released a press statement in which it states the six-month qualifying period “will benefit millions of working people who will gain new rights and offer business and employers much needed clarity. To further strengthen these protections, the Government has committed to ensure that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted.”
It is interesting to note that the amendment is being made by primary legislation, and there are no existing powers to vary the qualifying period in the Employment Rights Act 1996. The reason for making this amendment through primary legislation is to make this change more durable. A future government that wanted to restore a two-year qualifying period couldn’t simply issue new regulations as it would need a full parliamentary bill, public debate, scrutiny, and whipped votes. This signals that Labour wants the six-month threshold to be seen as a settled, structural part of employment law, not just an experiment.
Another major and arguably more transformative part of Labour’s reform package is the proposal to remove the statutory cap on unfair-dismissal compensation. Under current law, compensation for “ordinary” unfair dismissal is capped at:
- a basic award (similar to statutory redundancy pay), plus
- a compensatory award, limited to the lower of either one year’s gross pay, or a statutory ceiling (currently £115,115).
This structure means that even where an employee has suffered severe financial loss. For example, long-term unemployment, loss of career progression, or being effectively pushed out of a sector, tribunals cannot award damages for the full amount lost. Labour’s proposal changes that.
It should be noted though that the Government haven’t properly particularised what exactly will be lifted. It is all very ambiguous at this stage. It has not yet been specified whether the compensation limit will be unlimited (in the same sense as discrimination and whistleblowing cases), or whether they will remove the statutory ceiling. We will need to wait for further clarification on this point.
Removing the limit means tribunals can award full, uncapped compensation for proven loss, in the same way that they already can for discrimination claims or whistleblowing detriments. This means that compensation can finally reflect:
- prolonged periods of unemployment
- the impact on future earnings
- loss of pension and benefits
- reputational harm affecting employability
- financial consequences for older workers pushed out of their sector
Will this lead to huge settlement / judgment awards in the Employment Tribunal?
Probably not. Most unfair dismissal awards today (before this change has been implemented) are modest because:
- many claimants find new work quickly
- tribunals already consider whether employees “mitigated their loss”
- contributory fault reductions can still apply
- procedural breaches often do not lead to large compensatory awards
However, in the serious cases where dismissal genuinely derails someone’s career, the tribunal will finally have the power to award damages that reflect reality.
The Employment Rights Bill is expected to receive Royal Assent by the end of 2025, and the implementation of these reforms will take time. Key workers’ rights such as statutory sick pay from day one, paternity/unpaid parental leave from day one, and redundancy/collective-redundancy protections, will likely be in force from April 2026. More substantial reforms, including the unfair dismissal rights, will be introduced over a phased Schedule through 2026 and into 2027.
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