UK: Two-Year Qualifying Period For Unfair Dismissal In UK Only For New Joiners

Last Updated: 10 February 2012
Article by Charles Wynn-Evans and Kate Astbury

The Government plans on 6 April 2012 to increase the qualifying period of service required to have been completed for an employee to be able to claim unfair dismissal from one to two years in order to reduce the burden on business of unfair dismissal claims. It is understood that the Department for Business, Innovation and Skills (BIS) has now confirmed that, subject to Parliamentary approval, the new two year qualifying period for unfair dismissal will not be retrospective — it will only apply to employees whose employment begins on or after 6 April 2012 and those who are already employed before that date will retain the current one year qualifying period. This DechertOnPoint explores the potential impact these developments may have upon employers.

Policy Background

In response to an unattractive economic backdrop and rising unemployment, in its November 2011 press release BIS took the view that the move to a two year qualifying period will encourage growth and give businesses, especially small employers, confidence to hire more staff. It also estimated that the change will save business approximately £5.5m a year, and that this, combined with other proposals in the consultation, should see the number of unfair dismissal claims drop by up to around 2,000 a year. What it had not done, until recently, was to confirm that the regulations that will implement the change will only apply to employees whose employment begins on or after 6 April 2012.

Practical Consequences

Whilst the Government's response to the consultation on this proposal indicated that individual businesses agreed that extending the qualifying period would make them more confident about hiring new workers, it remains to be seen whether this will be the case. Also, it has to be said that it is not clear that this change to the eligibility threshold for unfair dismissal will make a significant difference to employers' overall exposure to potential employment liabilities. Many employers already make use of probationary periods and will generally have terminated the employment of those individuals who prove not to be suitable well before the current one year qualifying period has expired in any event. For such employers, having the extra year to dismiss may not make a great difference to their business. If employers end up being tempted only to address poor performance towards the end of the qualifying period, the risk is increased of other employment claims arising in the meantime.

One concern which has been expressed about the potential consequences of the increased qualifying period is that individuals who, but for the increased qualifying period, would have been able to claim unfair dismissal, may be more likely try to bring alternative claims, such as whistleblowing or unlawful discrimination, which do not have qualification periods (or indeed compensation caps). Some commentators have expressed the concern that employers will face greater levels of unfounded discrimination and whistleblowing complaints brought by those unable to claim unfair dismissal due to short service. The Government is, however, unconvinced that there will be widespread substitution of current unfair dismissal claims into other jurisdictions and claims that there is little evidence that, for example, where there are grounds for a discrimination claim, individuals are currently choosing to pursue an unfair dismissal claim instead.

Potential Challenge

While not directly impacting upon employers at this stage, there is also the possibility of a potential legal challenge to the two year threshold on the basis of indirect discrimination against certain groups.

Between 1985 and 1999, the qualifying period for unfair dismissal was also two years and a legal challenge was mounted on the basis that the two year limit was indirectly discriminatory on the grounds of sex, because women tended to have shorter service periods than men (R v Secretary of State ex parte Seymour-Smith and Perez (No.2) [2000] IRLR 263). The challenge ultimately failed as the House of Lords held that, while the limit did result in an unequal impact upon men and women, it was objectively justified.

The Government's own impact assessment of the proposal to increase the unfair dismissal eligibility threshold indicates that there may be some mileage in the argument that the increase in the qualifying period will have a disparate impact on young workers and, to a lesser extent, non-whites and women. It is therefore conceivable that this increase in the qualifying service requirement could also be subject to a similar challenge.


It would be ironic if a change to the law intended to improve recruitment were to cause employers to pause their engagement of new staff until April in order to avoid their being entitled to protection from unfair dismissal after one year under the current regime. The fact that new joiners will have to wait longer to acquire unfair dismissal claims does, however, increase the risk of staff resorting to bringing more whistleblowing and discrimination complaints. The proposed change does therefore reinforce the need for employers to consider whether they have adequate training and systems in place to minimise their exposure to such claims.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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