New Six-Month Unfair Dismissal Rule

The Employment Rights Bill has been moving through Parliament for what feels like an eternity, and many business owners have understandably struggled to keep track of where things stand. The political back-and-forth has been intense, with the Bill caught in a legislative tug of war between the House of Commons and the House of Lords. But at long last, we have clarity on one of the most important and controversial aspects of the reforms: unfair dismissal rights.

The Government has now confirmed that employees will not receive day-one unfair dismissal protection. Instead, the qualifying period will fall from two years to six months. This represents a significant shift in UK employment law. While it is not as far-reaching as the original proposal, it is still the shortest qualifying period for ordinary unfair dismissal in more than four decades, and it will change how small businesses manage new starters.

As an HR expert working closely with SMEs, I want to explain what this decision means for you. The legal commentary can feel dense and disconnected from day-to-day business realities, so my aim is to translate this into clear, practical guidance.

Why the Government Stepped Back from Day-One Rights

When day-one unfair dismissal rights were first proposed, they immediately raised red flags for employers. Probation periods would have required formal dismissal processes from the very first day of employment. Managers would have needed to handle early performance concerns with a level of procedural rigour usually reserved for long-serving employees. In short, the proposal looked unworkable.

The House of Lords shared those concerns and objected repeatedly, warning that day-one rights would cause unnecessary complications, especially for smaller employers. Their resistance threatened to delay the entire Employment Rights Bill. Eventually the Government decided that to keep the Bill on schedule, a compromise was necessary. After discussions with business groups and trade unions, ministers agreed that six months offered a fairer and more manageable solution. Even though this represents a retreat from Labour’s manifesto pledge, it has been widely accepted as a pragmatic outcome that avoids the operational challenges day-one rights would have created.

What the Six-Month Qualifying Period Means in Practice

Although employers may feel relieved that day-one protections have been dropped, it’s important not to underestimate how significant the shift to six months will be. For many small businesses, this will fundamentally change the rhythm of how recruitment, onboarding, and early performance management operate.

Probation periods, for example, will need to be managed far more tightly. Many employers currently rely on a six-month probation period, often with the option to extend it if needed. Under the new regime, waiting until the end of probation to review performance could leave you exposed, because employees will gain the right to bring an unfair dismissal claim once they cross the six-month threshold. This means that reviews will need to take place earlier, conversations about performance will need to happen sooner, and decisions about extending or ending probation will need to be made in good time.

Managers will also need to adjust their approach. The two-year qualifying period gave employers a relatively long window in which to assess capability and conduct. With only six months available, managers cannot afford to hesitate or hope issues resolve themselves. Early communication, accurate documentation, and timely decision-making will be more important than ever.

At the same time, the six-month rule does not exist in isolation. The Employment Rights Bill also doubles the time limit for bringing employment tribunal claims from three months to six and doubles the ACAS Early Conciliation period to twelve weeks. These changes combine to give employees considerably more time and flexibility if they choose to challenge a dismissal. Taken together, the reforms create a more protective environment for employees than the current legal framework.

What Stays the Same: Automatically Unfair Dismissal

It is important to remember that some dismissal rights have always been protected from day one of employment, and that will remain the case. Automatically unfair dismissal still applies immediately where the dismissal is related to matters such as pregnancy, whistleblowing, health and safety concerns, or asserting statutory rights. In these situations, the qualifying period has never applied and still won’t. That means employers must still exercise caution from the very beginning of the working relationship.

The Uncertainty Around the Compensation Cap

The Government’s announcement also included a statement that the compensation cap for unfair dismissal will be lifted. This has created a considerable amount of speculation, because it is not yet clear what “lifting” the cap actually means. At the moment, compensation is capped at the lower of £118,223 or fifty-two weeks’ gross pay.

The Government has not yet confirmed whether it intends to remove the cap entirely, remove one part of it, or raise the existing threshold. This is one of the most financially significant elements of the Employment Rights Bill, and until further detail is released, employers will be left with questions. We should see greater clarity during the twenty-six consultations the Government has committed to carrying out once the Bill receives Royal Assent.

What Happens Next?

Ministers are still aiming for the Employment Rights Bill to receive Royal Assent before Christmas. Royal Assent will not trigger immediate implementation; instead, it will open the door for a series of consultations and follow-up regulations. Much of the Bill’s practical detail including the timetable for when reforms take effect will be shaped by these consultations throughout 2025. In other words, the overall direction is clear, but the fine detail is still to come.

How Small Businesses Should Begin Preparing

Even though nothing changes immediately, the shift to a six-month qualifying period is significant enough that preparation is essential. Now is a good time to review your probation processes, making sure review points happen earlier and decisions are made promptly. It is also worth ensuring managers understand the shorter window they are working within and feel confident addressing concerns at an earlier stage.

Businesses should also pay close attention to developments around the compensation cap. Depending on the Government’s final position, employers could be facing higher financial exposure in certain cases, so understanding this risk early will be important.

This is also a good moment to reflect on your wider employment practices, including onboarding, induction, performance management, and record-keeping. With a shorter qualifying period, good HR practice becomes even more valuable in reducing risk and supporting confident decision-making.

Final Thoughts

The reduction of the unfair dismissal qualifying period to six months is a major development in UK employment law, even though it is not as radical as the proposed day-one rights. With the right planning and the right support, small businesses can adapt to these changes without unnecessary disruption. The key will be early preparation, strong clarity for managers, and well-structured processes that support fair and timely decisions.

As the remaining elements of the Employment Rights Bill unfold, I will continue translating the legal complexities into practical, plain-English guidance so you can stay ahead of the changes and continue running your business with confidence.