Employment Rights Bill update

27 November 2025 saw the UK Government take a U-turn on their stance in respect of unfair dismissal rights.

Up until this point, the House of Commons had insisted on the complete abolition of the 2-year qualifying period and instead, proposed that employees would have a day one right to be protected from unfair dismissal, with employers allowed to operate an ‘initial period of employment’ during which they could follow a ‘dismissal light’ process.

In a surprise press release, the government confirmed that in order to ensure that the Bill reaches Royal Assent, and to adhere to the previously published timeline for implementation, a compromise had been reached and that the Employment Rights Bill would instead see the reduction of the qualifying period for unfair dismissal reduced from 2 years to 6 months. Additionally, they announced that the maximum compensation cap would be “lifted”.

There was considerable speculation around whether a lifted cap would result in compensation awards being entirely uncapped or whether it was to mean that the current maximum award would be increased. One suggestion was that the lower cap of 52 weeks’ pay would be removed, with the maximum compensatory award remaining (currently £118,223). The Bill returned to the House of Commons on 8 December for consideration of the proposed amendments. This resulted in confirmation that the proposal was to remove the cap entirely. A complete removal would have a significant impact upon employers. The Bill returned to the House of Lords on 10 December for further review and it remains to be seen how the House of Lords will respond and therefore how the amended legislation will deal with this.

More importantly, employers will do well to note that, as a result of this unexpected agreement, there is unlikely to be any need for further consultation on the issue of unfair dismissal as there is no longer any need to define the originally proposed ‘initial period for employment’. As a result, it is expected that roll out of the reduced qualifying period will happen in 2026 and not in 2027 as previously indicated. Watch this space!

Caitlyn Sinclair, Trainee Solicitor: csi@bto.co.uk / 0141 221 8012