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In a reversal of its manifesto commitment to offer all employees 'day one' protection from unfair dismissal, the Government has agreed to reduce the qualifying period required for an employee to bring an unfair dismissal claim, from two years to six months.
How did we get here?
As we set out in our previous Employment Rights Bill update, the Bill is in a stage known as 'ping-pong', with the House of Lords insisting on key amendments, requiring the Bill to return to the House of Commons for consideration of the changes proposed by the Lords.
On 27 November 2025, it was announced that the Bill would return to the House Commons on 8 December 2025. Later that day, the Government issued a press release confirming that it would be rowing back on its manifesto pledge of introducing unfair dismissal protections as a 'day one' right.
What did the press release say?
1. Qualifying period to be reduced to six months
The press release confirmed that following "constructive conversations" with trade unions and business representatives, it had been agreed that reducing the qualifying period for unfair dismissal from two years to six months was a "workable package".
It should be remembered that employees who are dismissed for an 'automatically unfair' reason (such as pregnancy or making a protected disclosure) will remain protected from unfair dismissal from 'day one'.
2. Change to be made by primary legislation
The press release confirmed the unfair dismissal qualifying period "can only be varied by primary legislation", as opposed to the existing power of variation under section 209 Employment Rights Act 1996.
This will mean that it will be more difficult for future governments to make any subsequent changes to the qualifying period.
3. Removal of the compensation cap?
While the press release was clear on the position regarding unfair dismissal protections, it somewhat vaguely stated that the:
The current compensatory award which may be awarded in a successful unfair dismissal claim is currently capped at the lower of 52 weeks' gross pay or £118,223. It is unclear whether the Government:
- proposes to lift this cap altogether – meaning awards of compensation will be unlimited (as is the case in discrimination and whistleblowing claims);
- proposes to lift 'part of' the cap – removing either the '52 weeks' gross pay' or '£118,223' aspect of the cap; or
- proposes to increase the existing cap – increasing the maximum compensation which can be claimed under the cap (however, this appears unlikely given the cap limit is reviewed annually in April).
The Government's intention should hopefully become clear as the Bill progresses.
Next steps
As noted in the press release, the Government believes the resolution of this issue will enable it to move forward to ensure the Bill "can reach Royal Assent and keep to the Government's published delivery timeline".
While there are still key areas of contention which remain (notably, the offer of guaranteed hours for zero/low hours workers, trade union ballot thresholds and the automatic opt in of trade union members to political funds), given the Government's concession on unfair dismissal rights, it may be that the Lords back down on the remaining areas of contention, should the House of Commons refuse to pass the Lords' amendments on its next reading on 8 December.
This course of action may allow the Bill to receive Royal Assent before Christmas. We'll continue to keep a close eye on the Bill and provide further updates in due course.
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