A key policy that would have given workers the right to claim unfair dismissal after their first day on the job has been abandoned by the government in favor of a six-month limit.
In a U-turn that directly contravenes Labour’s manifesto, the government said it had struck a deal between the country’s six biggest business groups and trade union bosses to reverse its plans for the biggest upgrade to employment rights for a generation.
The move comes after Business Secretary Peter Kyle told businesses at a CBI conference this week that he would listen to concerns about the effects of changes to the law on hiring. A trade union source told the Guardian: “They have surrendered and there may be more to come.”
The Trades Union Congress said it was ready to accept the compromise arrangement after several days of talks. Its general secretary, Paul Novak, said, “The absolute priority now is to get these rights – like the first day of sick pay – into the statute book so that working people can start receiving their benefits from next April.”
A TUC source said the view was that a six-month limit was more practical than the nine-month probation period, which would be scrapped.
But MPs are likely to be alarmed by the breach of Labour’s manifesto, which promised “day one” protections against unfair dismissal, while trade unions descended into infighting over 11th-hour changes.
The reversal also increases pressure on ministers already battling allegations that Rachel Reeves’s autumn budget broke Labour’s pre-election promise not to raise taxes on working people.
Kyle replaces Jonathan Reynolds as Business Secretary, the latter having piloted the legislation with former Deputy Prime Minister Angela Rayner.
A source close to Rayner said she would respond after talking to other MPs. A few weeks earlier, the former Deputy Prime Minister had given a speech in the Chamber strongly defending the security of the first day.
Kyle pledged on Monday to ensure businesses will not be “damaged” as a result of the changes, including a ban on zero-hours contracts and first-day protections for workers against unfair dismissal.
“I will not let it become zero-sum, (you) give one to the other, the other loses… it has to be fixed,” he said.
After days of closed-door meetings with the TUC, six unions and ministers at the Department for Business and Trade, the leaders of the six major business lobby groups welcomed the breakthrough with relief.
In a joint statement, the lobby groups said the move was “vital for worker safety as well as business confidence to support hiring and employment”.
A union source said the changes had been agreed to speed the bill through the House of Lords, which had significantly delayed the legislation. This would mean that the qualifying period for unfair dismissal would be reduced from two years to six months.
A senior union figure said: “If Ping Pong had gone ahead after Christmas, sick pay from day one would have ended in April, and other new entitlements could have been delayed beyond April 2027.”
Another called the agreement a “good outcome” that would enshrine workplace protections into law from six months of employment. “The Tories can’t come back and just extend the term by two years.
“Clearly, the bottom line is that there is no risk of delaying the legislation – it will be in place by Christmas and employers will have to get behind it.”
The deal marks a dramatic turnaround on the part of union bosses, and highlights differences of opinion among some of Labour’s biggest financial supporters. As recently as last month the TUC was warning that more than 2 million workers would be at risk of unfair dismissal in a six-month period.
Unite general secretary, Sharon Graham, said the bill was now “a shell of its former self” as she made clear her objection to the agreement reached with other trade unions.,
He said, “These continued disputes will only harm workers’ confidence that the promised protections will be worth the wait. Labor needs to keep its promises.”
The bill originally promised that the qualifying period for unfair dismissal would be removed entirely and the government proposed a light touch probation period that businesses could use instead, which was limited in law to nine months. That probationary period will now be removed and the law will make it impossible for an employee to claim unfair dismissal if they have been in post for less than six months.
Unions insisted they had won concessions, including costs, but the move is likely to anger left-wing Labor MPs, who regard the employment rights bill as one of their key offerings.
The bill has been amended three times by Tory and Liberal Democrat peers in the Lords to accommodate key business demands. Kyle said he would do “whatever it takes” to overcome parliamentary blockages on the bill due to Lords amendments, before consulting on its implementation.
“The voice of business, the voice of people who work in business, will be heard as we move forward to implement those key parts of the Employment Rights Bill. And yes, I’m talking about zero hours contracts and day one rights,” he said.
Conservative leader Kemi Badenoch said it was “another disgraceful U-turn”.
“Workers talk stability, but govern in chaos. No company can plan, invest or hire with this level of uncertainty.”
He said the bill still included measures that “will hurt businesses and be terrible for economic growth, and the Conservatives will fight every single one. If Labor won’t eliminate the worst elements of this terrible bill, we will. Britain cannot build prosperity with more and more bureaucracy.”
The Department of Business and Trade said the outcome was the result of a negotiation process. “The government was pleased to facilitate these discussions and set an example of the benefits of working together, and is committed to engaging with trade unions, business and employers to improve working lives, support businesses and deliver economic growth and good job creation,” it said in a statement.
Bosses were warning that the bill would increase pressure on employers amid a downturn in the jobs market, with the potential to hit recruitment of young and vulnerable people in particular.
Six business lobby groups said: “Businesses will be relieved that the Government has agreed to a key amendment to the Employment Rights Bill which could pave the way for its early approval.”
However, he said there were a number of key points where bosses still had objections, including rights to guaranteed hours for zero-hours contract workers and greater powers for trade union organisation.
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