Two-Year Qualifying Period For Unfair Dismissal In UK Only For New Joiners

The Government plans on 6 April 2012 to increase the qualifying period of service required to have been completed for an employee to be able to claim unfair dismissal from one to two years in order to reduce the burden on business of unfair dismissal claims. It is understood that the Department for Business, Innovation and Skills (BIS) has now confirmed that, subject to Parliamentary approval, the new two year qualifying period for unfair dismissal will not be retrospective — it will only apply to employees whose employment begins on or after 6 April 2012 and those who are already employed before that date will retain the current one year qualifying period. This DechertOnPoint explores the potential impact these developments may have upon employers.

Policy Background

In response to an unattractive economic backdrop and rising unemployment, in its November 2011 press release BIS took the view that the move to a two year qualifying period will encourage growth and give businesses, especially small employers, confidence to hire more staff. It also estimated that the change will save business approximately £5.5m a year, and that this, combined with other proposals in the consultation, should see the number of unfair dismissal claims drop by up to around 2,000 a year. What it had not done, until recently, was to confirm that the regulations that will implement the change will only apply to employees whose employment begins on or after 6 April 2012.

Practical Consequences

Whilst the Government's response to the consultation on this proposal indicated that individual businesses agreed that extending the qualifying period would make them more confident about hiring new workers, it remains to be seen whether this will be the case. Also, it has to be said that it is not clear that this change to the eligibility threshold for unfair dismissal will make a significant difference to employers' overall exposure to potential employment liabilities. Many employers already make use of probationary periods and will generally have terminated the employment of those individuals who prove not to be suitable well before the current one year qualifying period has expired in any event. For such employers, having the extra year to dismiss may not make a great difference to their business. If employers end up being tempted only to address poor performance towards the end of the qualifying period, the risk is increased of other employment claims arising in the...