The government has stepped back from one of the most contentious corridors of the Employment Rights Bill, abandoning its pledge to give workers the power to claim illegal redundancy from day one.
The dramatic shift follows months of pressure from business groups who argued that the offer would hurt job creation and increase legal pitfalls for employers who had been battling rising costs.
The revised plan, described by some insiders as a “necessary reset”, means workers will now need six months’ service before being able to bring an unfair dismissal claim.
While this is still a big drop from the current two-time qualifying period, it’s far from the instant protection, firstly supported by former deputy high minister Angela Rayner.
This concession keeps the Bill alive but raises fresh questions about the unborn direction of Labour’s plant reforms.
A Compromise Born Out of Business Backlash
Whitehall sources say ministers eventually accepted the concerns raised by employers, trade bodies and even some peers.
The fear was simple: granting day-one unfair dismissal rights could trigger a surge in claims from employees who had barely settled into the job.
Businesses argued it risked creating a “hire-and-fire minefield” at a time when firms need stability and clear rules.
The government’s own assessment estimated that the wider Employment Rights Bill could cost companies around £5 billion a year in additional administrative burdens.
To avoid a prolonged showdown with the House of Lords and a potential delay in the Bill receiving Royal Assent, ministers agreed to reduce, but not scrap, the proposed new rights.
A Department for Business and Trade spokesperson confirmed that intensive talks were held between unions and employers to keep the Bill on track.
They added that day-one sick pay and day-one paternity leave are still scheduled to begin next April, maintaining the government’s pledge to strengthen core employee rights.
The spokesman said: “Reforms to benefit millions of working people, including some of the lowest paid workers, would otherwise be significantly delayed if the Bill does not reach Royal Assent in line with our delivery timetable.
Businesses, too, need time to prepare for what is a series of significant changes.”
Political Tensions Rise
The change has sparked accusations that Labour is watering down its own employment reforms. Shadow business secretary Andrew Griffith did not mince his words, calling the move a major embarrassment.
He said: “This humiliating U-turn on a Labour flagship bill is a Conservative victory and will give some relief to business. But this is just one element of this rushed 330-page, job-killing legislation.
It doesn’t change the fact that the Bill is still not fit-for-purpose, nor does it change the fact that it will give Unions the ‘Right to Roam’, ban banter in pubs, or end flexible working.
Rachel Reeves’ budget was another nail in the coffin for British Business.
They’re pressing ahead with their Family Business Death Tax and 330-page (Un)Employment Rights Bill.
I’ve set out how we are going to overturn all of Labour’s job-killing measures pic.twitter.com/40br868GSh
— Andrew Griffith MP (@griffitha) November 27, 2025
‘Keir Starmer must grow a backbone, stand up to his union paymasters and ditch every single job-destroying anti-growth measure in the employment rights bill now.’”
Angela Rayner previously said the stronger basic workplace rights would be “truly transformative”, but her departure from government has clearly left the door open for recalibration, and in some cases, retreat.
Downing Street, however, insists the overall package remains crucial for raising employment standards and boosting long-term growth.
Earlier this week, the Prime Minister’s spokesman said: “The Employment Rights Bill is good for workers, good for businesses, and good for the economy…
We will overturn all attempts to scupper our plans, including watering down day one protection from unfair dismissal and limiting the ban on exploitative zero hours contracts.”
Business Groups Warned of Heavy Costs
Many employers had been vocal in their frustration, arguing that the original unfair dismissal proposal risked damaging productivity and creating uncertainty.
CBI chief Rain Newton-Smith described the legislation as “disappointing and damaging,” accusing ministers of brushing off credible warnings from the business community.
“Business is not just a resource to be taxed when the going gets tough,” she said. “They are the ones creating jobs, building opportunities, lifting living standards and driving real change in communities.”
Conservative peer Lord Leigh, who fought against the initial plan in the Lords, welcomed the government’s rethink but warned that other parts of the Bill still go too far.
He said, “I am pleased that the government has finally listened to the points made in the House of Lords, explaining that this bill would have caused enormous damage to British business.
There was not a single business representative body, or even a single business, in favour of these proposals.
‘However, there are still some very unsatisfactory changes, in particular giving enormous powers to the unions, and these also need to be challenged.’”
What does it mean for Workers and Employers?
For workers, the six-month unfair dismissal rule is still a significant improvement on the two-year wait currently required. It brings the UK closer in line with many European employment standards, strengthening job security for new starters.
For employers, it brings relief that the most controversial element of the Employment Rights Bill, the day-one unfair dismissal power, has been withdrawn, reducing the risk of immediate legal challenges.
But the debate is far from over. The Bill includes other reforms affecting zero-hours contracts, flexible working, union powers, and employee protections, all of which are likely to face further scrutiny as the legislation moves through Parliament.
The revised Bill is expected to progress with fewer obstacles, but divisions remain. Labour must now walk a tightrope: reassuring businesses that it is not anti-enterprise, while convincing workers and unions that it is still committed to meaningful reform.
In essence, the U-turn shows that the government’s sweeping workers’ rights revolution is still alive, just not quite in the form originally promised.
