Finally, a bit of good news for small businesses.
The government has U-turned on its manifesto commitment to offer all workers the right to claim unfair dismissal from their first day in a job. Instead, ministers now plan to introduce the right after six months – a significant climbdown following pressure from business groups who warned it would discourage firms from hiring.
And honestly? This is the right call.
Why day-one unfair dismissal rights were a problem
Look, I’m an HR professional. I spend my days helping businesses treat their employees fairly, manage performance properly, and stay on the right side of employment law. I’m absolutely not anti-worker rights.
But day-one unfair dismissal protection was a policy that sounded good in theory and would have been an absolute disaster in practice.
Here’s why:
It would have made hiring terrifying for small businesses. When you’re a business owner taking on a new employee, you’re taking a risk. You’re committing to salary, National Insurance, pension contributions, equipment, training time – all before you know whether that person is actually going to work out.
The ability to part ways quickly and fairly with someone who clearly isn’t the right fit is essential. Without it, businesses would simply stop hiring – or they’d only hire people they already knew, which kills opportunity for everyone else.
It would have created a litigation nightmare. Employment tribunals are already overstretched. Imagine the flood of claims from people in their first few weeks of employment who didn’t pass probation. The system would have collapsed under the weight of it.
It ignored the reality of probationary periods. Most businesses have a three or six-month probation period for good reason. It’s not about treating new starters badly – it’s about having a realistic window to assess whether someone has the skills, attitude, and cultural fit they claimed in their interview.
What’s actually happening now
The government has announced that unfair dismissal protection will come in after six months instead of day one. They’ve also ditched the proposed new legal probation period, which would likely have been nine months.
Currently, employees need two years of continuous service before they can claim unfair dismissal. So six months is still a significant reduction – but it’s a compromise that actually makes sense.
Other new day-one rights to sick pay and paternity leave will still go ahead, coming into effect in April 2026.
Business Secretary Peter Kyle has said the compromise was found through discussions between unions and employers, and the government’s role was not to stand in the way of that agreement.
Why this matters for small businesses
Six business groups were involved in these discussions, and they’ve said companies will be relieved by this announcement – though they still have concerns about many of the powers contained in the government’s employment package.
And they’re right to be relieved.
For small businesses especially, this U-turn removes what would have been a massive barrier to growth. When you’re a team of five or ten people, every hire matters enormously. Getting it wrong is expensive and disruptive.
Having a reasonable window to assess whether someone is genuinely right for the role – without the threat of a tribunal claim hanging over you from day one – is absolutely essential.
The backlash was inevitable
Of course, not everyone is happy about this.
Unite the union has called the employment bill a shell of its former self, and accused Labour of rowing back on promises. The TUC, while welcoming the news, is pushing for the legislation to be passed quickly so workers can start benefitting from the other new rights.
The Conservatives have called it humiliating but say the bill still isn’t fit for purpose.
Here’s my take: this is what compromise looks like. It’s not perfect for anyone, but it’s workable for most people.
Employees still get stronger protections than they have now. Businesses still get a realistic probation window. And the legislation actually stands a chance of passing through Parliament without years of delays.
What this means going forward
Let’s be clear: this doesn’t solve all the challenges facing small businesses right now. Employment costs are still rising. National Insurance contributions are going up. Compliance requirements are getting stricter.
But this U-turn shows that the government is at least listening to business concerns – and that’s something we haven’t seen enough of lately.
It also shows that when business groups and unions sit down together and have honest conversations, sensible compromises can be reached.
The absolute priority now is getting the rest of this legislation right. Day-one sick pay, enhanced parental leave protections, stronger rights around flexible working – these are all coming in April 2026, and businesses need time to prepare.
My advice to business owners
If you’re running a small business, here’s what you need to do:
- Review your probation processes now. Six months is the new window, so make sure your probation periods, review processes, and documentation are watertight.
- Get your policies updated. Day-one sick pay and other new rights are still coming. Make sure your employee handbook reflects the changes.
- Train your managers. If you’ve got people managing others, they need to understand how to handle probation fairly, give constructive feedback, and document performance issues properly.
- Get proper HR support. These changes are complex, and getting them wrong could be expensive. Whether that’s through an HR consultant like us or an in-house professional, make sure you’ve got someone who knows what they’re doing.
The bottom line
This U-turn on day-one unfair dismissal rights is a rare piece of genuinely positive news for small businesses. It shows that common sense can prevail, even in the middle of a politically charged debate about workers’ rights.
The government has listened. Business groups have engaged constructively. And we’ve ended up with a compromise that’s actually workable.
Now let’s make sure the rest of this employment legislation gets the same level of pragmatic thinking.
Need help preparing for the Employment Rights Bill changes coming in April 2026?
Call myself or Faye at Rebox HR on 01327 640070. We’ll help you get your policies, processes, and people ready.
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Natalie Ellis HR 