Many people do not realise that since 6 April 2012 new employees must work continuously for two years before they acquire full employment rights. This is known as the “qualifying period” or “two-year rule”.
Why the change?
In 2012, the global economy was in total disarray. The UK, being in the thick of the global recession, saw unemployment rates climb to 8.4% in late 2011. The government at the time needed to drive recruitment and to do this it felt employers needed more flexibility. To achieve this, they changed the law so that employees would need two years’ continuous employment (rather than the previous one year) before they acquired full employment rights. This increased ability to dismiss an employee in the first two years of their employment was intended to reduce reluctance to employ people in the first place.
Where are we now?
With the current cost-of-living crisis, high inflation, increased employer NI contributions and regular increases to the base rate in response, many employers (and employees) are forced to pull their belts tight. Regrettably, this can inevitably lead to job losses.
For some employers, staff with less than two years’ service are ‘low hanging fruit’ where job losses are required. This is because until an employee has two years’ continuous employment, they do not have the right not to be unfairly dismissed.
It is vital however that employers realise there are still claims that can be made in that first two-year period. We call these ‘day one claims’.
Automatically Unfair Dismissal
Claims for most types of automatically unfair dismissal can be made without two years’ service. These include where a dismissal is:
- in connection with an application for flexible working
- for a health and safety reason
- related to the National Minimum Wage
- for a reason connected with rights under the Working Time Regulations; and / or
- in connection with exercising the right to be accompanied to a disciplinary or grievance hearing.
Dismissals in connection with spent convictions and TUPE can also be automatically unfair but still require the individual to have two years’ qualifying service to bring a claim.
Discrimination
Regardless of length of service, employees who have a protected characteristic disability are protected against discrimination under the Equality Act 2010.
There are nine protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.
There can be crossover between automatically unfair dismissal and discrimination. For example, dismissal for reasons connected with pregnancy or maternity would be automatically unfair and discriminatory.
Whistleblowing
Dismissing an employee for making a protected disclosure (i.e., “blowing the whistle”) is unlawful.
Any employer who dismisses a whistleblower, or even just treats them detrimentally, could easily find themselves on the wrong end of a whistleblowing claim and there is no minimum length of service required.
Unlike with unfair dismissal claims where the compensatory award is capped at the lesser of 52 weeks’ gross pay or £105,707 (at the time of writing), compensation for a successful whistleblowing claim is uncapped and compensation for injury to feelings can be awarded as well.
The law around whistleblowing is complex and so any employer considering dismissing an employee who may have made a protected disclosure should take expert advice before acting.
Breach of contract
Any party to a contract can make a claim in response to a breach of that contract from the point in time it is in force. As such, an employee can bring a breach of contract claim without two years’ continuous service.
In employment law, one of the most common breach of contract claims is for unpaid wages, particularly unpaid notice pay. Employers should therefore always ensure they know what notice is required under an employment contract and what other contractual obligations are in place.
The other thing for employees to be mindful of is whether their Staff Handbook forms part of an employee’s contract. If so, departure from policies or procedures relevant to a dismissal, e.g., a disciplinary policy or a redundancy policy, could give rise to a breach of contract claim.
Changes Are Coming: The Employment Rights Bill
Announced on 17 July 2024, the Employment Rights Bill brings some “once-in-a-generation” reforms in employment law. Although currently still making its way through the legislative process, the Bill is expected to come into law in either Summer or Autumn 2025. Some elements of what will become the Employment Rights Act 2025, will come into force immediately whereas some others are not expected until 2026/2027.
One of the most notable changes relates to “day one rights” and the current two-year qualifying period for certain employment protections. The Bill proposes to expand day one rights by providing employees with unfair dismissal protection from their first day of employment, subject to some important exceptions.
The government has promised to give employers some flexibility in the first six to nine months of employment (most likely, 9 months) by allowing employers to terminate someone’s employment during what they refer to as the “initial period of employment”. This appears to be a relabelling of what we currently refer to as the probationary period.
Additional regulations (not yet published) are expected to set out a specific “light touch procedure” that will apply to a termination of employment during this initial period.
It should be noted that redundancy dismissals will be exempt from the ‘light touch procedure’, which means that unfair dismissal protection will exist from day one of employment in the context of a redundancy situation. This means that an employee dismissed by reason of redundancy will have the right to bring an unfair dismissal claim in the employment tribunal, no matter what their length of service may be. Therefore, the days of (some) employers automatically selecting for redundancy employees with less than 2 years’ service will no longer be the low-risk approach it was once seen to be. The Bill does not change the two-year qualifying period to be entitled to a statutory redundancy payment.
Practical steps for employers
Even when confident that a decision to dismiss an employee with less than two years’ continuous service is the right decision, employers should meet with that employee to discuss matters before dismissing them. This is an employer’s opportunity to ‘set out their stall’ and, perhaps more importantly, to see what the employee has to say in response.
Such a meeting is useful because it should allow an employer to identify any underlying issues that may lend themselves to a ‘day one claim’, the presence of which would require an employer to tread more carefully. This is particularly so in cases of poor performance and absence.
Some employers may say that such a meeting only serves to give an employee the chance to delay their dismissal by feigning ill health or some other potential ‘day one claim’. Inevitably, there will be some who will do that. However, those employees are likely to be few and far between and avoiding stumbling into a day one claim is the lesser of those two evils.
Conclusion
Even though employees (currently) have fewer employment rights in the first two years of their employment, no employer should assume they have carte blanche to dismiss at will. Given the potential legal risks of mishandling a dismissal, it is a good idea to seek legal advice. This will be even more important as the law changes.
If you have any further inquiries regarding Employment Rights, please feel free to contact our Employment Team and we would be happy to help.