What do employers need to know following the government's U-turn on unfair dismissal?

There has been a surprising change in plan, with the government having made a U-turn on unfair dismissal and its qualifying period.

Following a series of discussions with business representatives and trade unions, the government has made a surprising U-turn, abandoning its proposal to make unfair dismissal a day-one right. Instead, it now proposes that the new qualifying period for ordinary unfair dismissal claims will be six months.

The government also confirmed that the proposal to make statutory sick pay payable from day one of sickness, as well as making paternity leave a day-one right, will proceed as planned.

Ordinary unfair dismissal

Under current legislation, employees must have 24 months of continuous service with their employer (known as the ‘qualifying period’) to be eligible to bring an ordinary unfair dismissal claim. Please note that this article focuses solely on ordinary unfair dismissal claims and does not cover situations where employees may bring an automatic unfair dismissal claim, for which the qualifying period may not apply.

Employees who succeed in an unfair dismissal claim may be awarded a basic award and a compensatory award. In most cases, the compensatory award is subject to a statutory upper limit or ‘cap’. The current cap is the lower of the employee’s gross annual salary (52 weeks) or £118,223.

What has been announced?

The government press release published on 27 November 2025 outlined the following proposed changes:

• The qualifying period for bringing an unfair dismissal claim will be reduced from two years to six months
• Existing day-one protections for discrimination and most automatically unfair dismissal grounds will remain unchanged
• Any future changes to the unfair dismissal qualifying period will require primary legislation, requiring greater parliamentary scrutiny and making such changes less likely
• The intention to lift the unfair dismissal compensation cap.

This announcement signals two major shifts in employment law proposals. The government has abandoned its manifesto pledge to make unfair dismissal a day-one right, and it has introduced a new proposal to lift the compensation cap – something that had not previously been discussed.

However, the press release published last month did not clarify whether the cap will be removed entirely or whether only the 52-week salary limit will be lifted while retaining the overall upper cap. Subsequent commentaries from various professionals suggest that the change may only affect the 52-week limit, but this has not yet been confirmed by officials.

What should employers do?

Although this is certainly positive news for businesses, the proposed reform still represents a significant shift from the current legislative framework. The change shortens the period during which employers can dismiss employees without ordinary unfair dismissal protection. As a result, probation periods, combined with early reviews of performance, conduct, and cultural fit, will become increasingly important. Employers should set clear expectations from day one, maintain documented reviews and records of feedback, and be prepared to provide a rational explanation if they decide to terminate employment.

Now is an ideal time to review and update internal policies and processes, ensuring that your current probationary review procedures are sufficiently robust. If you have any doubts or require guidance, please reach out to our team.

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