The government has dropped its flagship plan to give workers the right to claim unfair dismissal from day one, abandoning a key Labour manifesto pledge after an intense backlash from employers and a parliamentary standoff in the House of Lords.
Instead, the qualifying period for unfair dismissal claims will be set at six months, following two days of negotiations between government ministers, trade unions and business groups. The compromise is designed to ensure the Employment Rights Bill can pass before April 2026, when Labour wants the new rights to come into force.
Lisa Nandy, the culture secretary, said the government had reached an “impasse” with the Lords, which refused to support day-one dismissal rights.
“Unfair dismissal was the sticking point,” she told Times Radio. “We brought together trade unions and business leaders and they’ve negotiated a compromise. These rights will now come into force in six months. Treating this as a zero-sum game is how we got into this in the first place.”
Nandy insisted the move would still deliver “a massive difference to people across the country”, though privately several union figures said they were “unhappy” and had not expected the U-turn. One minister described the decision as “total self-destruction”.
A Labour MP close to Angela Rayner, who previously led on Labour’s workers’ rights package before her resignation, warned the watering-down risked weakening protections for millions in insecure, low-paid jobs.
TUC general secretary Paul Nowak urged peers to pass the bill quickly, despite disappointment among unions.
“The Employment Rights Bill is essential to better-quality, more secure jobs,” he said. “The absolute priority now is to get these rights — like day-one sick pay — on the statute book by next April.”
Under the revised plans, workers will still receive day-one rights to sick pay and paternity leave, and a new Fair Work Agency will be launched in 2026 to enforce employment standards.
Peers had labelled day-one unfair dismissal rights the “most damaging” element of the bill for employers, warning it would undermine probation periods. They proposed a six-month threshold as a compromise, which the government has now accepted.
A government statement confirmed the shift was necessary to prevent the entire bill — including sick pay reform and paternity rights — from being delayed. It said businesses also need adequate time to prepare for “a series of significant changes”.
Andreas Adamides, CEO of Helm, said the original proposal had been one of the biggest concerns for scale-up founders.
“Day-one full rights was one of the biggest fears of our members, with many holding back hiring decisions,” he said. “It’s good to see the government showing some sense — but six months is still too soon. It creates an unnatural cliff-edge pressure on employers.”
Employment lawyer Jo Mackie, partner at Michelmores, said the outcome had been inevitable.
“This is no surprise. It was unwieldy and unworkable, and we predicted this would happen as soon as it was launched,” she said. “Probation periods are important for both employees and employers, and tribunals would have struggled with the surge of new claims.”
With the compromise now agreed, Labour hopes the revised Employment Rights Bill will receive Royal Assent in time to deliver the first phase of reforms next spring.
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