Day-one employment rights scaled back but Government proposes uncapped compensation for unfair dismissal

The Government’s decision to scale back the previously proposed day-one employment rights has been the biggest talking point in the latest draft of the Employment Rights Bill. Earlier proposals would have introduced sweeping changes to unfair dismissal, sick pay and workplace protections from the moment employment began.

While the revised version is far more limited, employers should not overlook the wider implications – including the proposed removal of the cap on compensation in unfair dismissal claims, which could lead to significantly higher exposure for high-earner exits. Employment partner, Meredith Hurst, provides a summary of the key changes and the potential implications for employers.

What were the original day-one proposals?

The initial plan, announced earlier this year, was to introduce a broad package of day-one rights for all employees. These were expected to include:

• the right to claim unfair dismissal from the first day of employment
• expanded rights to sick pay immediately on starting work.
• stronger protections linked to working hours and job security from day one.
• changes to probation periods, which would likely have required formal written justification for any extension or dismissal.
• a ‘light touch’ dismissal process in the initial probationary employment period.

For employers, especially smaller organisations, the proposals would have required a major rethink of recruitment, onboarding and probation management.

What’s been scaled back?

Following concerns about the impact on recruitment flexibility, especially for smaller employers and those relying on seasonal roles, and the administrative burden of applying full procedural protections from day one, the Government has significantly dialled down the scope of these reforms.

The current version of the Employment Rights Bill does not introduce day-one unfair dismissal rights and does not overhaul probation periods. Instead, the focus has shifted towards:

• a six month qualifying period – announced on 27 November 2025. This is per-haps the most significant u-turn as the Government bows to pressure from the likes of the Federation of Small Businesses and the British Chambers of Commerce.
• strengthened enforcement, particularly via the new Fair Work Agency.
• targeted improvements around predictable working patterns, pregnancy rights and workplace fairness.
• a more gradual approach to broader employee protections.

In practical terms, this means employers do not need to redesign their entire early employment framework – at least for now.

Government proposes uncapped compensation for unfair dismissal

The big news which broke on 5 December 2025, was the apparent disappearance of the limit of £118,223 (or 52 weeks’ gross pay – whichever is lower), from the current draft of the ERB. This means that employers cannot simply pay the highest paid employees the cap and dismiss with impunity.

The game is changing significantly, making it all the more vital to take advice early and control the escalating financial risk.

What employers should be thinking about

Although the immediate pressure has eased, this shift in tone signals a longer term trend towards greater baseline protection in the early stages of employment. Employers may find it useful to:

• ensure probation and workplace policies are clear, up to date and consistently applied.
• keep records of performance discussions and early-stage concerns and be prepared to tackle problem employees in good time before the proposed six-month qualifying period expires.
• review onboarding processes to make sure expectations are set clearly from day one.
• prepare for the possibility of tighter rules on probation extensions in future years.

These steps help build good HR practice now and reduce risk if further reforms emerge down the line.

We’re here to help you navigate the changes

If you’re reviewing your probation policies, planning workforce changes or want to understand how the revised Bill might affect dismissal risk and compensation exposure, our specialist employment lawyers in London and the South East can guide you through the detail.

We help employers put practical safeguards in place early, manage risk confidently, and prepare for further legislative change.

For advice tailored to your organisation, contact us to speak with one of the team.