PolicyLens

Methodology note

Give day-one unfair-dismissal rights: calculation note

Scenario estimate showing gross costs, offsets and behavioural uncertainty; not an official costing.

View main policy page: Give day-one unfair-dismissal rights

Central fiscal result

+GBP 0.9bn - Net public-finance impact in 2027-28

Low case: +GBP 0.2bn. High case: +GBP 4.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Extend ordinary unfair-dismissal protection from six months to day one, with probation rules.
  • Baseline is current law and published official data unless stated.
  • Private business costs are excluded unless they affect tax or procurement.
  • Target year is 2027-28, with later years shown separately.

Affected population

  • Unit is employees with short tenure.
  • ERA analysis cites 6.3m employees gaining protection.
  • Model is beyond the six-month ERA baseline.
  • Small firms and probation hires are most exposed.

Gross impact

  • ERA analysis says unfair-dismissal reform protects 6.3m employees.
  • Official day-one unfair-dismissal EANDCB is GBP 0.042bn.
  • True day-one extension adds behavioural and public HR costs.
  • Central tribunal/enforcement pressure is GBP 0.35bn.

Fiscal build-up, central case

  • Public-sector HR and legal costs: +GBP 0.25bn
  • Tribunal and Acas capacity: +GBP 0.35bn
  • Employment and welfare risk: +GBP 0.35bn
  • Tax and NI offsets: -GBP 0.10bn
  • Business-cost fiscal spillover: +GBP 0.05bn

Central net impact: +GBP 0.9bn in 2027-28.

Behaviour and pass-through

  • Low case assumes clear probation rules.
  • Central assumes more claims and cautious hiring.
  • High case assumes weak probation exceptions.
  • Employers may screen harder before hiring.
  • No retention saving is scored.

Phasing

  • 2026-27: +GBP 0.3bn. Guidance and tribunals.
  • 2027-28: +GBP 0.9bn. Rights take effect.
  • 2028-29: +GBP 1.0bn. Claims develop.
  • 2029-30: +GBP 1.1bn. Case law settles.

Main source groups

  • S1: S1 ERA analysis: 6.3m employees affected by unfair-dismissal reform.
  • S2: S2 ERA Table A10: unfair-dismissal cost about GBP 42m EANDCB.
  • S3: S3 Tribunal stats: 58,000 open single cases.
  • S4: S4 Autor/Kerr/Kugler: protection costs can reduce productivity.
  • S5: S5 HMT/ONS labour-market data: hiring is already soft.