Nearly two-thirds of British firms say government plans to give new recruits the right to claim unfair dismissal from their first day at work will negatively affect their operations, according to new research.
The findings, based on a survey by HR and employment law consultancy Peninsula, gathered the views of nearly 600 business owners. It found that 62 percent of firms are concerned about the proposal, while 39 percent believe it poses a major or critical risk to their business.
The measure is part of the Employment Rights Bill, which is expected to become law this autumn. From 2027, the qualifying period for unfair dismissal claims will be scrapped, giving workers day-one protection. The current threshold is two years.
Among those raising concerns is Bryan Davis, chairman of Green Labyrinth, a training provider based in Swindon. “We’ve had a lot of people who have lied on CVs, who have interviewed very well, but have not been able to carry out their work. If they had employment rights from day one, that would have caused us a lot of problems,” he told The Times.
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“I pay you for doing a job. If you don’t do the job, I reserve the right not to pay you. This new bill breaks that covenant,” said Davis.
Green Labyrinth has already seen its HR costs rise as a result of the proposed reforms. Davis said the company was now spending more than £12,000 annually on HR consultancy and was exploring options such as using AI to handle admin roles or switching to annualised contracts.
Not all employers are opposed to the change. Stuart Brown, co-founder and financial director at care provider Whispers Care Solutions, said it would help build trust with new hires. “New starters will know they’re protected from their first day, and that’s reassuring. It pushes employers, us included, to give people the best start possible.”
Broader reforms and business concerns
The day-one dismissal rule is one of several measures in the Employment Rights Bill, which has been championed by Deputy Prime Minister Angela Rayner. Other planned reforms include the removal of statutory sick pay limits, a ban on exploitative zero-hours contracts and new duties on employers to prevent sexual harassment.
The government says the bill will extend workplace protections “already given by the best British companies to millions more workers”.
But 71 percent of businesses surveyed by Peninsula said they were worried about rising costs, while 66 percent cited concerns over red tape. The government’s own estimates suggest the bill could add £5 billion in annual costs to UK employers.
Kate Palmer, employment services director at Peninsula, warned that “financial pressure was only going to increase” and urged firms to begin preparing now. “These changes are coming whether businesses like them or not, so preparation is key.”
The implementation of day-one rights was originally scheduled for 2026 but was delayed by a year due to fears that a surge in cases could overwhelm the already backlogged employment tribunal system.
What the new law will entail
Under the current system, employees generally need two years of continuous service before they are eligible to bring a claim for unfair dismissal. From 2027, this threshold will be removed.
To address employer concerns, the government is expected to introduce a formal statutory probation period with a lighter-touch dismissal process. Legal sources say this could involve a shorter cap on compensation and less burdensome procedural requirements during the early months of employment.
The bill also includes:
- New rights to request flexible working from day one
- The introduction of a “right to switch off” from work communications outside contracted hours
- A statutory code of practice to prevent misuse of fire-and-rehire tactics
- Mandatory menopause and gender pay gap action plans for large employers
- An enforcement body with expanded powers, including home entry and document seizure in some cases
The bill is being scrutinised in the House of Lords and is expected to receive royal assent later this year.
