Six-month unfair dismissal right to begin in January 2027

The government will commit to bringing in enhanced protections against unfair dismissal from the start of 2027, after watering down its plans last week.

Labour ministers agreed to introduce the right to make a claim after six months in a job instead of on day one, after a backlash from business groups.

This new qualifying period would still be shorter than the current two years.

At the time of last week’s climbdown, the business department did not specify when the amended six-month right would come into force.

However, ministers are now expected to make a commitment to implement the new protection from 1 January 2027, when the legislation to deliver the change returns to the House of Commons on Monday.

Such assurances, made from the dispatch box, are not legally binding but are seen as carrying additional political weight by MPs and peers.

The move, which was first reported by The Guardian, followed talks this week between ministers and former deputy PM Angela Rayner and ex-employment minister Justin Madders, two key architects of the original proposals.

Following the talks, Rayner agreed to withdraw an amendment she had planned to table, which would have made the start date 2026.

Writing on social media, Rayner appeared to welcome the government’s decision, saying a January 2027 start date would introduce protection for those hired after July 2026, bringing “real change for workers”.

Currently, after two continuous years in a job workers gain additional legal protections against so-called “ordinary” unfair dismissal.

It means employers must identify a fair reason for dismissal – such as conduct or capability – and show that they acted reasonably and followed a fair process.

Until last week, Labour was planning to scrap this qualifying period completely at an unspecified point during 2027, with a new legal probation period, likely to have been nine months, introduced as a safeguard for companies.

But following talks with unions and business groups last week, the qualifying period will instead be set at six months’ service, and the legal probation period shelved.

The U-turn has been widely welcomed by business groups, which had warned the original proposals would discourage companies from hiring.

It has been condemned by some MPs on the left of the Labour Party, as well as the Unite union, a major donor through the affiliation fees its members pay to the party.

The government still plans to bring in new day-one rights to sick pay and paternity leave rights from April 2026.

Separately, the government is also expected to abolish the current limits on compensation for financial loss in ordinary unfair dismissal cases.

Currently, awards to former employees who successfully bring a claim are limited to either their annual salary or £118,223, whichever is lower.

But the government plans to amend its employment rights bill to abolish both these caps, as the bill goes through its final stages in Parliament.

This would bring the process more into line with “automatic” unfair dismissal cases – where workers have been sacked for reasons such as discrimination and whistleblowing – where financial loss awards are uncapped.

Abolishing the caps did not feature in the original version of the bill unveiled in October last year, or in Labour’s general election manifesto.

But ministers committed to do so last week during talks to reach an agreed route forward between some unions and industry groups.