As we prepare this month’s newsletter, the Employment Rights Bill (ERB) is approaching the final stages of becoming law and is widely expected to be enacted as the Employment Rights Act 2025.
Since our previous update, there has been a notable change to the proposed ‘Day 1’ protection from unfair dismissal. Rather than a complete removal of the qualifying period, the government has now introduced a six-month service requirement before an employee can bring an ordinary unfair dismissal claim.
Despite this amendment, a major area of debate remains. The government has proposed removing the compensatory award cap for unfair dismissal claims entirely. At present, compensation is capped at the lower of 52 weeks’ pay or £118,223. However, as of today (16th), the House of Lords has opposed this change, calling instead for a formal consultation with stakeholders before any decision is made.
Last night (15th), the House of Commons rejected the proposal for consultation, and the government has indicated that it does not intend to make any further concessions. This is particularly interesting given the existence of the Salisbury Convention, a parliamentary principle whereby the House of Lords does not usually block legislation that implements commitments made in the government’s election manifesto. As reform of unfair dismissal rules was included in the manifesto, this raises an important question: will the Bill pass before Parliament breaks for Christmas on the 18th?
There has also been recent media speculation suggesting that the government may bring forward the implementation date of the unfair dismissal reforms. Originally, these changes were expected to come into force sometime in 2027. However, given the revised approach, it is now possible that the reforms could take effect from 1 January 2027. If this were the case, an employee who commenced employment in July 2026 would qualify for protection once the new rules are introduced in January 2027.
As we head into the final week before Christmas, three key questions remain:
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Will we see the introduction of a new Employment Rights Act 2025?
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Will the compensatory award cap for unfair dismissal claims be removed?
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Will changes to unfair dismissal rules be introduced earlier than expected, coming into force on 1 January 2027?
We of course will be keeping a keen eye on any further developments as we head towards the new year.
