U-turn on day one worker rights: What employers need to know

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Key amendments proposed

A number of notable changes have been announced:

1. Day-One unfair dismissal rights: In a significant development announced last night, the government confirmed that the controversial day-one unfair dismissal rights will not go ahead. Instead, the existing two-year qualifying period will be reduced to six months. This is a major shift from current law and, if enacted, will require employers to rethink probation periods, onboarding, performance management, and dismissal procedures.
   Further details—including the implementation date—are still awaited.
2. Zero-hours contracts and guaranteed hours: The government has proposed requiring employers to offer guaranteed hours from day one. The Lords rejected this, suggesting instead that employers must write to workers at the end of each reference period, offering guaranteed hours which workers can accept or decline.
3. Industrial action and union rules: Peers also proposed amendments relating to industrial action ballot thresholds, and whether union members should pay a political levy.
4. Possible removal of the compensation cap: The government is also considering whether to remove the current compensation cap for unfair dismissal, which is presently one year’s salary, or £118,223 (whichever is lower). Removing or altering this cap would have significant financial implications for employers facing tribunal claims. However, no concrete proposals or timelines have yet been published.

These amendments collectively signal a push to moderate some of the bolder reforms originally planned.

What this means for employers right now

For employers, the current phase means:

• No immediate changes to policies or contracts, as the Bill is not yet finalised.
• A need to monitor developments closely, because once agreement is reached, implementation could move quickly.
• Potential disruption to HR processes, particularly around dismissal rights, contract flexibility, and engagement with workers on variable hours.

In short, employers must stay informed and prepared for rapid adjustments once the legislation becomes clearer.

What employers should do next

Although nothing is finalised, employers should begin preparing by:

• Reviewing internal dismissal procedures and documentation, anticipating a shorter qualifying period.
• Reviewing how zero-hours and variable-hours arrangements are managed, in case new obligations arise.
• Staying engaged with updates, as changes could be implemented at short notice once the Bill is agreed.

The Employment Rights Bill remains in flux, and while the legislative process continues, employers should remain vigilant. The eventual reforms are likely to bring material changes to dismissal rights, contractual arrangements, and HR compliance, requiring swift operational adjustments when the final version becomes law.