PolicyLens

Green - Labour market

Give day-one unfair-dismissal rights

Extend ordinary unfair-dismissal protection from six months to day one, with probation rules.

Last updated: May 2026.

Read the policy-specific methodology note

Legal baseline

The central case models true day-one rights beyond the ERA six-month qualifying-period compromise.

  • ERA analysis protects 6.3m employees.
  • Official day-one cost was about GBP 42m.
  • True day-one rights are wider.

Core trade-offs

Workers gain job security. Employers face higher expected dismissal costs. Marginal hiring, probation jobs and small-firm trial roles are likely to fall.

  • Workers gain legal security.
  • Employers face dismissal risk.
  • Marginal hiring likely falls.

Illustrative fiscal impact

+GBP 0.2bn to +GBP 4.0bn. Central estimate: +GBP 0.9bn.

  • Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
  • Gross costs are separated from tax, NI and benefit offsets.
  • Private business costs are not automatically fiscal costs.
  • Behavioural responses widen the range materially.
  • This is not an official costing.

Economic impact by 2027-28

  • Jobs: Likely negative for marginal hiring and trial jobs, especially in small firms.
  • Wages: Raises security rather than hourly pay; may lower wage flexibility.
  • Prices: Small direct effect; costs may pass through in labour-intensive sectors.
  • GDP / productivity: Likely negative at the margin if poor job matches persist longer.

Assessment

Day-one protection can reduce arbitrary dismissal, but it also raises the expected cost of taking a chance on a new hire. The cost is not just tribunal fees; it is changed hiring behaviour.

Confidence: Low. Official costs cover narrower policy; behavioural hiring effects are unobserved.

Main risks

  • Hiring risk: Employers may avoid marginal candidates or rely more on contractors.
  • Tribunal pressure: Extra claims would land on an already stretched system.
  • Probation disputes: Rules around fair probation dismissal may become heavily litigated.

Safeguards

  • Keep a clear probation route.
  • Fund Acas and tribunals first.
  • Monitor hiring among young workers.

Academic evidence

Autor, Kerr and Kugler, Economic Journal, 2007

Does Employment Protection Reduce Productivity?

Employment-protection changes can reduce productivity where firms face higher firing and adjustment costs.

Supports caution on policies that raise dismissal, scheduling or adjustment costs.

Does Employment Protection Reduce Productivity? (2007)

UK government evidence

Department for Business and Trade, 2026

Employment Rights Act 2025 - Economic Analysis

The ERA economic analysis estimates around GBP 1bn annual direct business cost before social-care bargaining.

Provides official baseline costs and affected groups.

Employment Rights Act 2025 - Economic Analysis (2026)

Department for Business and Trade, 2026

Employment Rights Act 2025 impact assessments

The IA collection separates guaranteed hours, unfair dismissal, fire and rehire, union and equality measures.

Prevents treating broad rights packages as one undifferentiated pledge.

Employment Rights Act 2025 impact assessments (2026)

Sources

Other Green policies

PolicyLens estimates are illustrative and not official costings.