The government has reached agreement around unfair dismissal protections as part of the new Employment Rights Bill. 

Instead of day-one unfair dismissal protections as originally laid out in the Bill, the qualifying period for unfair dismissal will be cut from 24 months to six months. However, the government is committed to lifting the compensation cap for those claims.

The decision follows talks between the Department for Business and Trade (DBT) and stakeholders within the business community. Day one sick pay and paternity leave rights remain in place. 

The government has committed to full consultation on the detail of each measure outlined in the Bill as part of the process of introducing legislation necessary to deliver reforms.

While many elements will be implemented through secondary legislation, the government has confirmed that certain complex changes, such as those relating to unfair dismissal will require primary legislation. It also emphasised the importance of supporting small businesses in adopting these changes.

Amani White, ICAEW’s Senior Policy Manager, welcomed the decision: “This compromise goes some way towards balancing employees’ interests in a fair and transparent process with the need for businesses to manage workforce risk effectively and not be deterred from hiring."

On the lifting of the compensation cap for unfair dismissal claims, White said: “The government commitment to lift the compensation cap for unfair dismissal claims significantly increases financial exposure for businesses.

“It also creates uncertainty around potential liabilities, especially in a time when doing business is already so uncertain, costly and difficult. It’s time for the government to deliver the conditions for the growth that the UK needs.”