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....

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