The Employment Rights Bill - The UK Government's U-Turn on Unfair Dismissal Changes

The Employment Rights Bill has now passed and is expected to obtain Royal Assent before Christmas.

In our recent webinars, blogs, articles and updates on the Bill, we noted that the Government was unlikely to compromise on its manifesto commitment to introduce day-one unfair dismissal rights. However, the Government confirmed in late November that it was abandoning day-one protection and instead would be introducing a six-month qualifying period, reduced from the current two years. This means that employees with at least 6 months of continuous service will be able to claim unfair dismissal at the Employment Tribunal.

While this change in the Government’s plans is already well publicised, two less widely reported but significant points have also emerged. Firstly, the Government has committed to ensuring that the qualifying period can be varied only by primary legislation, rather than secondary legislation, making it much harder for a future government to amend. Secondly, the Government has stated that the unfair dismissal compensation cap will be “lifted”. The most recent update indicated that the intention is to remove both the current 52-weeks’ pay cap and the overall statutory cap (currently £118,223) for unfair dismissal awards, though the Government has agreed to carry out an impact assessment before implementing the unfair dismissal sections of the new Act. This represents a significant change from the existing framework, potentially allowing Tribunals to award uncapped compensatory awards. Further detail is expected shortly, as the six-month qualifying period and compensation cap changes are expected to be implemented sometime in 2026 or early 2027.

We will continue to monitor developments in relation to this matter and the other changes to employment law which are being brought into force by the Act, and keep you updated. Please follow us on LinkedIn to see our updates and register for our webinars. In the meantime, thank you for your support in 2025. We wish you a happy festive season and best wishes for 2026!