The government has reversed its contentious plans to hand all new staff protection from unfair dismissal from day one, after months of warnings about the workers’ rights package from industry and fierce political resistance from the House of Lords.
Under revised proposals announced by the Department for Business and Trade (DBT) on Thursday, the protection will now come into force after six months of an employee starting at a new job.
The policy, which formed an integral part of the government’s flagship Employment Rights Bill, was reversed amid concerns the package would continue to be held up by the House of Lords and jeopardise its ability to deliver the rest of the measures.
Employers are currently able to remove staff without giving a reason for two years, in a bid to encourage employment and reduce the likelihood of time consuming and expensive legal challenges. Labour had planned to abolish that provision entirely as part of its pre-election manifesto, along with other major changes to employment law, like outlawing “exploitative” zero-hours contracts and banning so-called ‘fire and rehire’.
But the changes to rights from day one – particularly around unfair dismissal – sparked an aggressive and protracted rearguard action from businesses, who warned it would kill off their ability to take on more staff.
News of the climbdown will be welcomed by the UK’s largest industry bodies known as the ‘B5’, who have repeatedly urged ministers to shelve the protection laws and prioritise economic growth.
The DBT made the decision after a succession of meetings with unions and business representatives, which it said were “constructive”.
The business groups involved in the discussions welcomed the climbdown, saying it will give businesses “confidence to hire and support employment, at the same time as protecting workers.
“Businesses will still have concerns about many of the powers contained in this Bill. This includes guaranteed hours contracts, seasonal and temporary workers and thresholds for industrial action,” they added.
Workers’ rights package slammed by business groups
The decision comes despite new business secretary Peter Kyle promising to implement the package “in full” at September’s Labour party conference, comments which this week he watered down.
Speaking at the CBI’s annual conference, Kyle said: “I’ll do what it takes to get it through, because I need to get on with the real business, which is implementing it.”
“So it has been… a frustration of mine that some of the area that will be filled in by the result of a consultation that meaningfully engages all sides and all voices, has been filled by people projecting onto what their worst fears are of it. But that is not the reality that I will be driving towards,” he added.
Later that day, the outgoing chair of the industry body, Rupert Soames, condemned the “incoherence” of the workers’ rights package, saying it contradicted the government’s other ambitions to boost employment of young people and grow the economy.
“The government says they recognise the drag from burdensome regulation on business, and say they are committed to reducing it,” he told delegates. “In the face of these two objectives, they have significantly increased the cost of employing people, particularly the young. And they are in the process of passing the Employment Rights Bill, which will massively increase the regulatory burden and the risk of employment, and yes, introducing a whole new regulator.”
The workers’ rights measures had been held up for several months by peers in the House of Lords, many of whom warned the measure – along with changes to zero-hours contracts – would choke off employment. The impasse had led concerns to grow that entire bill would not be ratified by parliament and included on the statute book in time for the first measures to be introduced in April.
TUC general secretary Paul Nowak said: “The absolute priority now is to get these rights – like day one sick pay – on the statute book so that working people can start benefitting from them from next April.”
Labour’s political opponents have long branded the package the ‘Unemployment Rights Bill’ over concerns of the chilling effect it would have on job creation.
Responding to the reversal, shadow business secretary Andrew Griffith 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 the bill is not fit for purpose.”