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UK employees who are still on probation will receive a lower level of compensation for unfair dismissal under proposals set out by the Labour government as part of its sweeping overhaul of employment law.
A provision giving workers protection against unfair dismissal from their first day in a job is the most contentious element of a wide-ranging employment rights bill published on Thursday, presented by ministers as a once in a generation upgrade of workers’ rights.
About a third of the UK’s workforce have been in their current job for less than two years and could benefit from the new right, which Daniel Pollard, a partner at the law firm Charles Russell Speechlys, described as “the most radical change to unfair dismissal law since it was first introduced in 1971”.
But after fierce lobbying from business groups, which argue the policy will put a freeze on hiring, the government has conceded that employers will be able to follow a “lighter touch” process, if they determine a recruit is not right for the job over the course of their probation.
Details of how a statutory probation process will work have yet to be decided, and will be set out in regulation and a code of conduct after the bill becomes law. But proposals outlined on Thursday pointed to a significant softening of the original policy.
The government said in a “next steps” document, published alongside the bill, that its preference would be for a nine-month statutory probation period — longer than the three- to six-month periods that many employers currently operate.
Kate Bell, assistant general secretary at the Trades Union Congress, said that making sure employers followed a fair process when they dismissed an employee would be more important than the length of probation
But the government will also “consult on what a compensation regime for successful claims during the probation period will be, with consideration given to tribunals not being able to award the full compensatory damages currently available”.
Ministers are nervous that the new right could lead to a surge in claims to employment tribunals that are already overburdened, with waiting lists of up to two years for a hearing.
The next steps document made it clear the government is seeking to deter people from pursuing shaky claims.
But a principle that workers with a shorter tenure should not qualify for the same level of compensation as those with longer tenures will be controversial with unions, which have campaigned for “day one rights”.
Darren Newman, a consultant on employment law, said there were fears that even a “light touch” process for dismissing employees during probation could “cause chaos”, as HR departments became “bogged down in the technicalities of the procedure”.
But limiting compensation during probation periods would be “a surprising move” given that earlier versions of Labour’s plans included proposals to lift statutory caps on tribunal awards, he noted.
The maximum award a tribunal can make for unfair dismissal is whichever is lower out of £115,115 or a year’s gross pay. But tribunals already take into account length of service when calculating compensation, and “regularly . . . award zero compensation”, Newman said.
Caspar Glyn, chair of the Employment Lawyers’ Association, said the “lighter touch” process could amount to “bringing a day one right in through the front door and smuggling it out through the back door” for employees dismissed on performance grounds.
Yet it would still be a “sea change” in protection for recent hires facing dismissal as part of a collective redundancy round, he noted.