Will the Employment Rights Bill be Delayed?

Last week, we saw the Employment Rights Bill 2025 (ERB) ‘ping pong’ in quick succession between the House of Commons and the House of Lords.

This followed government amendments to the unfair dismissal provisions which had not previously been accepted by the House of Lords, with the intention of breaking the deadlock between the two Houses, and to enable the ERB to move forwards to receive Royal Assent.

With one aspect of the ERB still not agreed, where are we now and will the timetable laid out in the government’s roadmap be delayed?

Unfair dismissal under the Employment Rights Bill

Of the provisions of the ERB which had not previously been agreed by the House of Lords, day one unfair dismissal rights has been the most controversial.

Day one unfair dismissal rights formed part of the government’s 2024 manifesto. The government intended to introduce the ability for employees to claim ordinary unfair dismissal from day one of employment, subject to an initial (probationary) period. Currently, employees must have two years’ service to claim unfair dismissal in most circumstances, with day one unfair dismissal rights only being available in a limited number of scenarios.

On 27 November 2025, the Department for Business and Trade confirmed that, following conversations between trade unions and business representatives, the government is reducing the qualifying period for unfair dismissal from 24 months to six months. The government amendment paper to the ERB confirmed that this right will come into force on 1 January 2027.

With the House of Commons having accepted the Lords’ position on this, the qualifying period for unfair dismissal claims is now settled. This provides certainty for employers and avoids the need for consultation around rules which would apply during an initial period of employment, which would have added complexity.

The proposal to remove the cap on compensation for unfair dismissal

Unexpectedly, the government also committed to lifting the compensation cap on unfair dismissal, an amendment not previously tabled and introduced without formal consultation or impact assessment. Baroness Lloyd of Effra, the Under-Secretary of State for Business and Trade, has stated that this had been agreed with employers and trade unions as a compromise as part of a package deal to get the ERB to Royal Assent.

Whilst there was initially some uncertainty around what this meant, with many believing that the government was proposing to remove solely the cap of 52-weeks’ pay, it was later confirmed that the proposal is to completely remove the compensation cap – meaning that both the cap of 52-weeks’ pay and the overall numerical cap (currently £118,223) will be lifted.

The government’s rationale for this amendment is that the current compensatory cap incentivises claimants to construct complex cases alleging discrimination in order to access uncapped compensation. It is therefore hoped that removing the cap for ordinary unfair dismissal cases will lessen this incentive, reducing the complexity of cases and easing the burden on the employment tribunal system.

However, if brought into force, the removal of the cap will be very unpopular with employers. The potential impact is wide-ranging, completely changing the employment law landscape and, in particular, paving the way for high earners to pursue unfair dismissal claims, leading to greater risk of high-value and complex litigation for employers, and increased pressure on an already over-burdened tribunal system. Further, it is likely that the reduction in the qualifying period for claiming unfair dismissal will, in its own right, have the government’s desired effect of reducing the incentive for claimants to issue complex claims. Claimants with under two years’ service often feel they have no choice but to issue such claims as a means to access justice when they do not qualify for unfair dismissal protection.

The House of Lords considered these amendments on 10 December 2025 and narrowly voted to reject the removal of the cap on compensatory awards. The Lords put forward an amendment requiring the government to conduct a review of the current compensatory limit within three months of the passing of the ERB.

What will happen next and what impact with this have on the Employment Rights Bill timetable?

With the House of Commons rising for Christmas recess on 18 December, it remains to be seen whether the ERB will pass this year. However, it has been reported that Kate Dearden MP, Parliamentary Under-Secretary of State for Business and Trade, has said there will be no further concessions granted by the government. The ERB is returning to the House of Commons today and will no doubt go back to the House of Lords immediately after. Pressure will be put on the Lords to vote through the ERB before the end of the year.

With Royal Assent originally expected in autumn 2025, some provisions of the ERB triggered by Royal Assent have already been delayed (primarily trade union/industrial action related changes). However, with some changes which were expected to come into force in April 2026 requiring secondary legislation (such as those relating to statutory sick pay, increasing the protective award and the introduction of sexual harassment protected disclosures), these measures could also potentially be delayed. If not, employers will need to move quickly to prepare for April’s changes.