Deputy Prime Minister Angela Rayner is at odds with Business Secretary Jonathan Reynolds over plans to grant workers full employment rights from day one of a job, as concerns grow among businesses about the impact of the proposed reforms.

The disagreement centres on how probation periods should function under the new system, which is part of Labour’s broader push to overhaul workers’ rights within the first 100 days of government.

Rayner is pushing for staff to receive full employment rights, including the ability to bring unfair dismissal claims to employment tribunals, after a short probation period. Currently, employees must work for at least two years to qualify for such protections. In contrast, Reynolds favours a longer probation period of up to nine months, arguing it provides a reasonable balance between employee rights and business needs.

A Whitehall source described the debate as “intense,” noting that reaching an agreement within the next fortnight remains uncertain. “Angela is less keen on a longer probation period, Reynolds thinks nine months is reasonable. It’s unclear if an agreement will be reached,” the source said.

The discussions are taking place against a backdrop of mounting discontent among business leaders, who argue that removing or drastically shortening probation periods could deter hiring and stifle growth. Businesses view probation as essential for assessing new hires, and there are fears that the changes could lead to a surge in costly and time-consuming unfair dismissal claims.

The proposed reforms, spearheaded by Rayner, are part of Labour’s manifesto commitment to strengthen workers’ rights, including ending zero-hour contracts, banning “fire and rehire” practices, raising the minimum wage, and enhancing the right to request flexible working and a four-day week. Labour’s pledge aims to “make work pay” and provide basic individual rights from day one, ending the current system that leaves workers waiting up to two years for protections against unfair dismissal, parental leave, and sick pay.

While Rayner and Reynolds have held joint meetings with CEOs, unions, and lobby groups to explain the proposed reforms, business leaders have voiced significant concerns. A survey by the Confederation of British Industry (CBI) found that 62% of members, including major companies like AstraZeneca, Drax, and PwC, believe the UK is becoming a less attractive place to do business and invest, with impending job market reforms cited as the primary concern.

The Institute of Directors’ economic confidence index, sometimes referred to as the “bosses’ union,” fell sharply from +7 in July to -12 in August, with recent news about employment rights cited as a key factor in the decline.

The disagreement between Rayner and Reynolds follows other internal divisions within Labour’s cabinet, including discontent over the decision to scrap the winter fuel allowance. Health Secretary Wes Streeting recently expressed his dissatisfaction with the policy, underscoring broader tensions within the party as it balances reform ambitions with economic concerns.

This week is expected to be crucial for resolving the dispute as the government prepares to unveil its employment rights bill next month. Ministers have pledged to introduce the bill within the first 100 days of taking office, but sources say it remains “unclear” if an agreement on day one rights will be reached in time. “Getting [Chancellor] Rachel Reeves, Jonathan [Reynolds], and Angela [Rayner] in the same place will be the point at which we can close it off,” a Whitehall source noted.

A government spokesman emphasised that the priority remains economic growth and wealth creation, adding, “Our plan for better workers’ rights is designed to help people into secure work and lead to a more productive workforce. This is why we are working in close partnership with business and civil society to find the balance between improving workers’ rights while supporting the brilliant businesses that pay people’s wages.”

As Labour navigates these complex negotiations, the outcome will be closely watched by both employees and employers, with significant implications for the UK’s labour market and economic outlook.