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This morning the Employment Rights Bill received Royal Assent, having finally been passed by the House of Lords on 16 December when the Conservatives withdrew their amendment on the unfair dismissal compensation cap removal.
The addition of this provision (as a sweetener for unions' agreement to retaining a six month qualifying period rather than day one unfair dismissal rights) caused controversy in both Houses, both over the circumstances of its introduction so late in the day (and in seeming contradiction of what had been agreed by business groups), and over its potential impact for employers and the stretched employment tribunal system (see our blog post here).
Their Lordships finally agreed the provision, on the basis that the government has committed to carry out and publish an enactment impact assessment, including on the implications of the removal of the cap on compensation, "as soon as the Bill achieves Royal Assent" and prior to commencement regulations (which theoretically could be rejected by the House of Lords, although this seems unlikely).
Parliamentary Under-Secretary of State, Baronness LLoyd of Efra, also stated that meetings with stakeholders would be arranged early in the new year to discuss the impact of this measure, the outcome of which will inform "what dedicated support or guidance might be appropriate". A dispute resolution taskforce is also promised, including business, trade unions and other experts, to help the government develop reforms to the employment tribunal system.
The Government has today stated in an updated Factsheet that it remains committed to the timelines set out in its previously published Roadmap for implementation of the Act over the next two years (although obviously this is now out of date in respect of unfair dismissal changes). Only the repeal of the Strikes (Minimum Service Levels) Act 2023 (the provisions of which were never fully implemented) takes effect immediately, with a few other industrial action changes coming into force in two months' time. The other reforms require commencement regulations, and many will also need consultation on and parliamentary approval of substantive regulations setting out the detail of the new rights. Reforms scheduled for April 2026 include day one rights to statutory sick pay and paternity leave and the launch of the Fair Work Agency. There are also 26 promised consultations to come.
The Factsheet comments that the majority of regulations will be commenced on the common commencement dates of 6 April and 1 October. An exception may be the unfair dismissal changes. In the Commons debate on 8 December, Kate Dearden MP, Parliamentary Under-Secretary State for Business and Trade, confirmed that the government planned to apply the reduced qualifying period for unfair dismissal from 1 January 2027 (ie, everyone whose continuous service started on or before 1 July 2026 will have the right from 1 January 2026, and those starting after 1 July 2026 will acquire the right after 6 months' service), with commencement regulations promised early in 2026. No comment has been made as to the timing of the removal of the compensation cap.
Businesses will need to keep a close eye on consultation outcomes and start planning for a wide range of changes. We will be updating our detailed client briefing on the planned changes and timing; please do get in touch in the New Year if you would like a copy or to discuss how best to plan for these significant changes.
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