New Deal talking points: day one unfair dismissal rights, probationary periods and the Dutch experience

The new Labour government has radical plans to overhaul employment law. It has promised to introduce an Employment Rights Bill in its first 100 days of government to enact a range of reforms. For many employers, the plan to introduce day one unfair dismissal rights is by far the biggest concern. A recent CIPD survey revealed that, while there is majority support for the idea of reducing the current two-year qualifying period, employers baulk at the total removal of any qualifying period (this option was favoured by only 5% of respondents).

Day one unfair dismissal rights and probationary periods

Since the introduction of unfair dismissal rights in 1971, the qualifying period has fluctuated between six months and two years - going up under Conservative rule and reducing under Labour. Between 1980 and 1985, the period was two years for larger employers and one year for smaller ones. However, at no time since its introduction over 50 years ago has the right not to be unfairly dismissed been a day one right.

Employers worry about the process, cost and risk in terminating the employment of new hire where it is quickly apparent that the new employee will not work out. Some employers say that they will be more reluctant to take the risk with new hires, and that this will deter growth in employment.

Others, however, argue that day one rights will encourage workers to move to better jobs, with a knock-on benefit to the UK economy. According to this argument (which Labour cites in its Plan to Make Work Pay) employees may be reluctant to move if faced with insecurity at the beginning of any new job if the employer does not take to them.

Labour did respond to employers’ concerns before the election. In October 2022, Labour had published a green paper, A New Deal for Working People which introduced the promise of day one unfair dismissal rights and made no reference to any exception for probationary periods. However, by May 2024 and the publication of Labour’s Plan to Make Work Pay document, the day one right had been qualified by “We will ensure employers can operate probationary periods to assess new hires”. This was repeated in the briefing paper which accompanied the King’s Speech.

Many employers are now asking what this will mean. We wrote about the potential practical implications earlier – but it does seem clear that workers will have some rights even during a probationary period as the Plan to Make Work Pay refers to “probationary periods with fair and transparent rules and processes”.

To understand how probationary periods might operate in the UK in future, we can look at how they are handled in one country which already has unfair dismissal rights subject to probationary periods – the Netherlands.

Dutch rules on probationary periods

The Netherlands has very restrictive dismissal rules. Prior approval is generally needed from the courts or labour authorities before dismissing any employee. According to OECD rankings, the Netherlands has the third highest level of dismissal protection out of all 38 OECD member countries (only Czechia and Türkiye score more highly – the UK scores 31^st of the 38 reflecting its relatively light touch employment protection laws).

However, during the probationary period, the Dutch strict employment protection rules do not apply. No prior approval is required to dismiss before the probationary period expires. An employee can challenge their dismissal under anti-discrimination laws (as is the case in the UK today) but cannot claim the ordinary protections against dismissal.

In the Netherlands, there is no automatic probationary period and the flexibility during the probationary period only applies where employer and employee have agreed this as part of the terms of employment. Further, it must be agreed in writing before the employee’s start date.

In the Netherlands, for indefinite employment contracts, the maximum duration of any probationary period is only two months – a short time in many cases to assess whether a new hire is suitable. There is no right to extend the probationary period if the employer is uncertain. If this approach is replicated in the UK then we can anticipate employers terminating the employment of a new hire who is on the cusp of the maximum probationary period if they are unsure about the employee’s fit for the role, rather than waiting longer to make a final decision and potentially confirming them in post.

Probationary periods in the Netherlands are prohibited if the employee is starting a new job with the same employer or following a transfer of an undertaking unless it is a role clearly requiring new skills or responsibilities. We can assume that Labour’s new laws will include a similar restriction, as it has talked of probationary periods for “new hires”.

Disputes in the Netherlands commonly arise where the employee argues that they started in fact before the contractual start date, as it is the starting work and not the commencement date in any contract which triggers the two-month period. Disputes also arise over whether the probationary period was agreed in writing before the start date.

Fixed-term contracts are more common in the Netherlands than in the UK and different rules apply for these. Fixed-term contracts are popular as prior approval is not required for a termination on the expiry of a fixed term and these are often used at the start of the employment relationship to give the employer more than two months to assess the employee. This approach is unlikely to translate into the UK as the failure to extend employment on the expiry of a fixed-term isI regarded in the UK as a dismissal like any other.

For fixed-term contracts under six months, no probationary period is permitted. If the fixed term is between six months and two years, the maximum probationary period is one month. If the fixed term is two years or more, then the same rules apply as for indefinite contracts. We don’t know if the Labour government plans to draw any similar distinctions between fixed-term and indefinite contracts.

Implications for UK employers

We are waiting for the draft Employment Rights Bill for more details about Labour’s plans. In the meantime, employers generally already include a probationary period in new employment contracts, but could start to pay more attention to whether they can prove the employee’s agreement to this. Even if the UK law does not go as far as to require the employee to have agreed in writing to any probationary period before starting, it is not difficult to foresee disputes as to whether any probationary period was ever accepted. Having written acceptance of employment terms will become more important than is the case today.

In light of the Dutch experience, it is also worth reviewing your approach to start dates. If the Labour government caps probationary periods at a maximum length of, for example, six months, then this is also likely to run from the employee’s real start date and not any later date which might be stated in the contract. Ensuring that your HR systems capture the real start date could become more important.

Employers should also review how they oversee and manage probationary periods. It will be crucial to make sure that processes are followed – and decisions taken - in good time, so that employers do not find that a probationary period has inadvertently overrun before taking a decision about an employee’s ongoing employment.

For more analysis of Labour’s plans and other articles in our talking points series, visit our Labour Policy Impact Hub.

With thanks to our colleague Helene Pruymboom at Bronsgeest Deur for her input into this insight