Ministers have abandoned plans to give workers day-one protection against unfair dismissal in a bid to ensure the Employment Rights Bill makes it through Parliament.
The Government now intends to introduce the right after six months of service instead – down from the current qualifying period of 24 months – in a U-turn that breaches Labour’s manifesto.
The legislation has been caught in a stand-off between peers and MPs over the original proposal to give workers protection on their first day in a job, as well as measures to ban “exploitative” zero hours contracts.
The Department for Business and Trade (DBT) insisted the updated package would still “benefit millions of working people who will gain new rights and offer business and employers much-needed clarity”.
But the climbdown risks angering Labour MPs, some of whom were quick to express disappointment on Thursday night, just a day after Rachel Reeves’ Budget appeared to calm backbench discontent.
Business Secretary Peter Kyle insisted the compromise had been found by “unions and the employers” and “it’s not my job to stand in the way of compromise”.
“They’ve gone through the difficult process of working together to find a compromise… it’s my job to accept it,” he told broadcasters on Thursday.
Other day-one rights to paternity leave and sick pay will still go ahead, coming into effect in April 2026, the DBT said.
Labour’s manifesto explicitly promised to “consult fully with businesses, workers, and civil society on how to put our plans into practice before legislation is passed”.
“This will include banning exploitative zero hours contracts; ending fire and rehire; and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal,” it said.
There was mixed union reaction to the U-turn, which follows concerns voiced by some businesses about potential costs and recruitment challenges.
Unite boss Sharon Graham said the Bill had become “a shell of its former self” while TUC general secretary Paul Nowak said the “absolute priority” was to get the legislation on to the statute books.
“Following the Government’s announcement, it is now vital that peers respect Labour’s manifesto mandate and that this Bill secures royal assent as quickly as possible,” Mr Nowak said.
Ms Graham said: “These constant row-backs will only damage workers’ confidence that the protections promised will be worth the wait. Labour needs to keep its promises.”
Business groups welcomed Thursday’s concession, saying the qualifying period of six months was “crucial for businesses’ confidence to hire and to support employment, at the same time as protecting workers”.
However, they warned that firms would “still have concerns” about many of the powers within the Bill, including thresholds for industrial action, guaranteed hours contracts and seasonal and temporary workers.
“We remain committed to working with Government and unions to dealing with this in the necessary secondary legislation to implement the Bill,” the six industry groups involved in discussions with trade unions said.
Tory leader Kemi Badenoch described the move as “another humiliating U-turn” for Labour and said the legislation still contains “measures that will damage businesses and be terrible for economic growth”.
“If Labour won’t scrap the worst elements of this awful Bill, we will. Britain cannot build prosperity with more and more bureaucracy,” she said.
Alex Hall-Chen, principal policy adviser for employment at the Institute of Directors, said: “This is great news for businesses.
“The Government’s climbdown will give employers the confidence that they can correct hiring mistakes without risking lengthy and expensive tribunal cases.”
But Labour MP for Middlesbrough and Thornaby East Andy McDonald branded the move a “complete betrayal” and vowed to push for its reversal.
“When Keir Starmer asked me to work with our trade unions to develop a programme for the biggest uplift in workers’ rights and protections in a generation, I did exactly as I was asked and we produced the New Deal for Working People,” he said.
“The plans announced today to merely reduce the qualifying period for unfair dismissal from two years to six months is a complete betrayal.”
He said “we cannot support that halfway measure”, adding: “This is a wrong-headed move and I will campaign to have this concession reversed.”
Labour MP for Poole Neil Duncan-Jordan told the Press Association: “There has been no discussion with the PLP about this.
“The Lords don’t have primacy over a manifesto commitment, so why have we capitulated?”
Labour MP for York Central Rachael Maskell told PA: “Employers have nothing to fear from day-one rights, but workers have everything to fear from an employer who doesn’t want day-one rights.”
Another Labour MP told PA that the climbdown showed that Sir Keir and Ms Reeves were “weak” and had caved to external pressure, adding: “The schtick is this is a workers’ Budget for working people, and then one of your flagship programmes, you knock off a key part of it.
“It’s a manifesto breach.”
