Unfair dismissal and reundancy

Only employees who have been continuously employed for two years are entitled to bring an unfair dismissal claim under s108 of the Employment Rights Act 1996.

The ERB will repeal S108 and so unfair dismissal will become a day one right. However, the ERB introduces provisions regards the dismissal of employees during the initial period of employment. During that initial period (the Government has hinted that it will be nine months) employers will only need to follow a ‘light touch’ procedure when dismissing an employee for a reason related to conduct, capability, illegality or any other reason relating to the employee. The Government refer to this initial period as a ‘statutory probationary period’.  It will not impact employees who are made redundant during that initial period.

These provisions give the Government the power to provide draft regulations outlining how long the initial period will be and what the ‘light touch procedure’ will look like.  The Government will also consult on how much compensation can be awarded by tribunals should an employee be unfairly dismissed during the initial period.   The right to written reasons for a dismissal, currently has a two-year qualifying period, will also be repealed.  Employees will qualify for this right after the end of the statutory probationary period.

The Government has promised that this will not be in force before autumn 2026 to give employers time to prepare. Draft regulations providing more of the details regarding the ‘initial period’ are expected in 2025.

Despite calls for the ‘outlawing’ of the dismiss and re-engage process, it is still lawful. Provided of course it follows a fair process and takes account of relevant collective redundancy provisions.

The provision in the ERB means that an employee who is dismissed for failing to agree a variation of their employment contract or dismissed and replaced or re-engaged on varied terms, will be considered automatically unfairly dismissed. The only exception to this is when an employer can demonstrate that the reason for the variation is ‘financial difficulties’. However, demonstrating financial difficulties will not be sufficient – the employer must also demonstrate that sufficient consultation has been carried out prior to the dismissal either with a trade union or an employee representative and whether an employee has been offered anything in return for the variation.

No date is promised for this change – some commentators are saying it will not take place until 2026.   

The Government issued a consultation on 21 October 2024 which closed on 2 December 2024. Under this consultation the Government proposed to offer interim relief to an employee who is bringing an unfair dismissal claim for failing to agree to a variation in their contract of employment.

Employers are required to collectively consult their workforce should they intend to make 20 or more employees redundant in ‘one establishment’ within 90 days. Where 20 or more redundancies are planned, it must consult for 30 days prior to any dismissals and where 100 or more redundancies are planned then 45 days collective consultation. This means that an organisation can avoid collective consultation if they can demonstrate that the redundancies are not all taking place in one establishment but are spread across the organisation and so do not meet the 20+ threshold. Where an employer fails to collectively consult in accordance with the current legislation, an affected employee is entitled to a protective award. The tribunal can award up to 90 days’ pay for each affected employee. Recently, following the ACAS code on fire and rehire coming into force, tribunals can uplift that award by up to 25% if it finds that the employer has unreasonably failed to follow the code.

In the first draft of the ERB, it removed the provision relating to ‘one establishment’, which meant all redundancies across an organisation would be taken into account, and all would be counted towards the threshold of 20 redundancies regardless of whether they are in different areas, parts of the business etc. However, following the March amendments to the ERB, this has changed. Collective consultation will now be triggered EITHER when 20 or more redundancies are planned within 90 days at one establishment OR when redundancies are planned within 90 days across more than one establishment and the number of redundancies is at least the threshold number of employees. This threshold number will be set by regulations. We understand that these regulations will set out criteria for assessing the threshold number (e.g. by reference to a particular percentage of employees). This marks one of very few concessions by the Government in favour of employers. For large employers, having the 20 threshold for consultation apply across the whole entity could have meant that consultation was needed on most occasions when redundancies occurred even if they were unrelated and part of the day-to-day of running a large organisation.

In addition, the amendments also confirm that the consultation required under must be carried out with appropriate representatives, however, it need not be carried out with all representatives together nor does the same agreement have to be met with all representatives. This presumably means that each establishment may come to a different agreement according to the needs of each establishment. The number thresholds will be mirrored in the obligation under s193 of TULRCA to notify the Secretary of State regards collective redundancies and similarly under s198A and the trigger for consultation obligations in a TUPE transfer.
The ERB (as amended in March 2025) will increase the cap on the protective award. Tribunals will be able to award up to 180 days where an employer has failed to properly consult under TULRCA.

We have no time frame for these changes.

The Government issued a consultation on 21 October 2024 which closed on 2 December 2024.

Under this consultation, the Government proposed to increase the protective award and either remove the cap completely or increase it from 90 days to 180 days. In addition, it consulted on whether interim relief should be given for employees who are fighting protective award claims.

The amendments noted followed the results of this consultation although the proposal to introduce interim relief has not been included. The report following the consultation can be found in the key documents section of the ERB hub.