Labour’s U-turn On Unfair Dismissal Rights: What a Six-Month Qualifying Period Means for Employers

The Labour government has now confirmed that it plans to abandon unfair dismissal as a day one right. Instead, the Employment Rights Bill is set to reduce the qualifying period from two years to six months. This is the political compromise struck with business groups and unions to get the Bill through Parliament after weeks of deadlock.

The game of Parliamentary “ping pong” is still in motion, but the U-turn has removed the main sticking point. The government’s own updates say the package is intended to keep the wider reforms on track, including day one rights to sick pay and paternity leave from April 2026, and the creation of a Fair Work Agency to police the new regime.

So what does this actually mean in practice for employers, and what should you be doing now?

How Unfair Dismissal Protection Will Change

Right now, employees usually need two years’ service before they can claim ordinary unfair dismissal. There is no statutory concept of a probation period, and most employers use the first two years as a risk buffer, subject to the usual day one risks such as discrimination and whistleblowing.

Under the compromise now on the table, the rules are intended to change as follows:

• The unfair dismissal qualifying period will drop from 24 months to 6 months.
• Existing day one protections against discrimination and automatically unfair dismissal will remain.
• According to current policy statements, the government has indicated that the cap on unfair dismissal compensation will be lifted, and that future changes to the qualifying period will require primary legislation (an Act of Parliament) rather than quiet tinkering by way of secondary legislation (regulations, rules and orders).

The exact commencement date for the new six-month right is not final, but the government’s published roadmap and recent commentary point to phased implementation between April 2026 and 2027. Employers should assume this is coming and start planning on that basis.

Why the Risk Shifts to the Front of the Employment Relationship

An 18-month reduction in the qualifying period is not a technical tweak. It fundamentally changes the shape of risk.

In simple terms:

• The cost of getting hiring decisions wrong is going up; and
• The window of time to correct those decisions, without unfair dismissal exposure, is shrinking.

The driving force behind this is Labour’s approach to tax and spend. Employers are already dealing with increased liability due to rising employer National Insurance contributions and frozen thresholds. The latest Autumn Budget extends the freeze on income tax and NIC thresholds, and will cap NI relief on salary sacrifice pension contributions at £2,000 per year from 2029. Over time, more people will fall into higher tax brackets without necessarily earning very much more in real terms.

Throwing “golden hellos” at candidates is unlikely to be enough to secure long-term loyalty, particularly when we are in a tax environment that deliberately leans on higher earners and on NICs. The only sensible response is to tighten the front end of the employee lifecycle: recruitment, vetting, onboarding and probation.

No More “Punting and Hoping”

Under a six-month qualifying period, informal hiring will hurt more, and faster. Employers will need to move away from the mentality of “the recruiter likes them and the interview felt good”, towards a more structured, evidence-based recruitment process. In practice, that can take shape in a multitude of ways but, in my view, it looks something like this.

Better designed selection processes

Employers will build in tools that show them how a candidate actually performs. For example:

• Setting work sample tests or technical exercises
• Using “on-the-job” assessment days
• Scenario-based tasks that mirror real issues in the role

These give you far more insight than an unstructured chat, particularly where interviews are commonly held via videoconferencing platforms. And, with the proliferation of AI tools, hiring managers are often seeing the “polished” version of a candidate rather than the real person, and making hiring decisions based on that first impression.

Taking back control from recruiters

Use of recruitment agencies will not go away, but what cannot happen is employers outsourcing their judgment to them. Bluntly, recruiters are working for their commission. Most importantly, they are not the ones who will carry the risk; you will.

It is perfectly acceptable to have recruiters produce a pool of candidates, but employers must:

• Insist on scrutinising and challenging CVs themselves
• Proactively obtain references from former employers
• Carry out proportionate checks, including online and social media research within legal and data-protection limits
• Be honest with themselves: “Is this candidate worth the risk, or are they just a hire for convenience?”

If the warning signs are there, they should not be ignored.

Documenting why you chose who you chose

Bringing discrimination claims is not just preserved for employees; it can also be done by candidates. In a world where corporate Britain is becoming ever more litigious, accurate and detailed records are worth their weight in gold.

Keeping factual notes on why you selected candidate A over candidate B can help place you in a defensible position if a dispute were to arise later. They can help you show an Employment Tribunal judge that decisions were based on objective criteria, rather than anything discriminatory.

Probation: your frontline risk tool

With a six-month unfair dismissal threshold, probation clauses will become your frontline risk management tool. A robust probation regime should now be treated as non-negotiable.

• Clear expectations from day one: explain in writing, at offer and induction stage, what success looks like in the role during probation. Be specific. “Good culture fit” and “strong communicator” are not enough. Your requirements must be translated into measurable expectations.
• Implement structured monthly reviews

If concerns arise, they should be recorded in writing early, not “saved up” for the end. Employers will need to take decisive action because, if someone is clearly not right for the role, then hoping things will improve is not a viable strategy (it never was). Under a six-month threshold, drifting into month seven through indecision is an avoidable own goal.

That said, this potential structure does not advocate for, or endorse, the abandonment of a fair process. Employers should still meet with the employee, explain concerns, listen to their side and confirm decisions in writing.

However, managers must be willing to say “this is not working” within the probation period. In some businesses, owners may also reserve the ultimate say as to whether a person will remain in employment or not.

Practical Steps for Employers

You do not need to tear up your contracts tomorrow morning, but you do need a plan. A sensible checklist would include:

• Audit contracts and policies: Identify clauses that refer to the current two-year qualifying period or that assume a long “risk-free” window. Check your standard probation clauses, notice periods and termination provisions for new starters.
• Upgrade recruitment and selection: Invest in this process and introduce or improve work sample tests and assessment tasks. Standardise interview questions and scoring where possible.
• Build or tighten your probation framework: Put a simple probation policy in place that sets out length, review points and possible outcomes. Create templates for monthly reviews so managers capture key information consistently. Make sure probation end dates are tracked centrally so they cannot be missed.
• Train line managers: Focus on early performance and conduct management, not just end-of-year appraisals. Cover the day one discrimination and whistleblowing risks and how to avoid victimisation. Give clear guidance on handling sickness absence, including when and how to involve occupational health.
• Review budgets and insurance: Factor in the potential for more unfair dismissal claims once the threshold drops. Consider whether your existing legal expenses insurance or reserves are realistic.

Final Thoughts

Moving from two years to six months is not as dramatic as day one unfair dismissal rights would have been, but it is still a major shift. The message for employers is simple:

• You cannot rely on time to bail you out of poor hiring decisions; and
• You cannot afford to be casual about probation, performance or sickness management in the first six months.

Those who tighten recruitment, manage probation actively and document fair, evidence-based decisions will be able to navigate the new regime with confidence. Those who hope it will all work out are likely to be the ones funding the first wave of test cases.