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. The Bill returned to the House of Commons on 8 December wherein it was confirmed that the proposal was to remove the cap entirely.

This surprise U-turn proved to be very beneficial as 16 December (after two further periods of consideration by the Commons and Lords alike) saw the Bill finally clear its last Parliamentary hurdle when it was approved by the Lords. The Bill is now expected to receive Royal Assent on 18 December 2025 and become law before Christmas.

The removal of the statutory cap for compensation is arguably the more drastic of these compromises, as it opens unfair dismissal claims up to potentially being as valuable as those for discrimination or whistleblowing. It is therefore likely that we will see a shift in attitudes and behaviours towards the bringing of unfair dismissal claims.

With the passing of the Bill this week, the first changes will be implemented in early 2026, with further changes rolled out at later stages, and into 2027.

2026 is certainly shaping up to be a big year for Employment Law – Watch this space!

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