Finance
UK waters down unfair dismissal plan after business pushback
Published by Global Banking and Finance Review
Posted on November 27, 2025
3 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 27, 2025
3 min readLast updated: January 20, 2026
The UK government has delayed new worker rights to six months after starting a job, following business feedback. The Employment Rights Bill now moves forward, aiming to improve worker protections.
By Sam Tabahriti
LONDON (Reuters) -Britain's government watered down plans to strengthen workers' protection against unfair dismissal on Thursday, saying employees would get the new rights six months after starting a job, not from their first day as originally planned.
The change - which followed talks with businesses that had warned that initial proposals would make hiring more difficult - removed the last major hurdle for the Employment Rights Bill to pass into law, the government said in an update.
The revised bill got a mixed reaction from unions. They welcomed the reduction from the current waiting time for dismissal rights of two years, and other new protections including day-one rights to sick pay and paternity leave from April 2026.
But major union Unite called the bill a "shell of its former self".
"With fire and rehire and zero hours contracts not being banned, the Bill is already unrecognisable," it said.
BILL A KEY PLEDGE
Business and Trade Secretary Peter Kyle told Sky News that the legislation was designed to "lead to more harmony and engagement in the workplace, increased productivity, never pitting one side against another."
The bill, a key Labour manifesto pledge, also seeks to ban what the government calls exploitative zero-hours contracts and end fire-and-rehire practices.
Britain ranks among the top OECD countries for minimum wage relative to median earnings, but has offered fewer statutory benefits such as paid sick leave and parental leave than most advanced economies.
Britain's economy has been largely stuck in a rut of slow growth since the 2007-08 financial crisis, something finance minister Rachel Reeves and Prime Minister Keir Starmer promised to end when the Labour Party returned to power after 14 years in 2024.
Kemi Badenoch, leader of the opposition Conservative Party, called the change a "humiliating u-turn" and said the bill still contained measures that would "damage businesses and be terrible for economic growth."
The move comes a day after Reeves announced 26 billion pounds ($34.41 billion) of tax rises in her annual budget.
Six major business groups, including the Confederation of British Industry (CBI), the British Chambers of Commerce and Federation of Small Businesses, welcomed the amendment on Thursday, saying it "keeps a qualifying period that is simple, meaningful and understood within existing legislation".
They urged continued dialogue on issues such as guaranteed hours contracts and seasonal work.
Helen Dickinson, chief executive of the British Retail Consortium, said the change was "an important, practical step."
The government has framed the reforms as key to improving working conditions and avoiding the widespread industrial action that disrupted services over the past two years.
It said most changes will take effect no earlier than 2026 and pledged further consultation on secondary legislation.
It also committed to ensuring that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted.
Mike Clancy, General Secretary of the Prospect union, said the bill "strengthens protection by lifting the cap on compensation payments" and makes the system simpler.
"This is a good deal for working people, negotiated by trade unions focused on securing deliverable upgrades to workers' rights," he said.
($1 = 0.7556 pounds)
(Reporting by Sam Tabahriti and Alistair Smout; Editing by Kirsten Donovan and Andrew Heavens)
Unfair dismissal refers to the termination of an employee's contract without a fair reason or without following proper procedures, which can lead to legal claims against the employer.
Zero-hours contracts are employment agreements where the employer does not guarantee any minimum working hours, allowing flexibility but often leading to uncertainty for the employee.
Sick pay is a form of financial compensation provided to employees who are unable to work due to illness. It can be statutory or contractual, depending on the employer's policy.
Paternity leave is time off work granted to fathers or partners following the birth or adoption of a child, allowing them to support their family during this period.
The Employment Rights Bill is legislation aimed at enhancing workers' rights and protections, including provisions related to unfair dismissal, sick pay, and paternity leave.
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