From ping-pong to progress: important changes for unfair dismissal rights under the Employment Rights Bill

The Employment Rights Bill (ERB) continues to dominate headlines and for good reason; not only is it the biggest shake-up of employment law in decades but, in recent weeks, certain provisions have also been the source of extended debate between the House of Commons and House of Lords. 

A key focus for the debate has been the government’s proposal to allow an employee to bring a claim for unfair dismissal from ‘day one’ of employment rather than having to wait two years, as is currently the case. Employers and business representative bodies have raised concerns about this proposal from the outset, with those concerns often focussing on the potential detrimental impact this could have on recruitment, particularly for young people. The House of Lords shared these fears and proposed an amendment that the right should attach after six months in employment. 

The Bill has been in Parliamentary “ping-pong” between the Commons and the Lords for several weeks partly because of this issue (although other proposed amendments to the right to a guaranteed hours contract and trade union reform are also in the mix). However, this impasse may be about to be lifted after a government announcement was issued last Thursday.

This announced that unfair dismissal will not become a ‘day one’ right but rather that the Bill will be amended to introduce a six-month qualifying period before employees have the right to claim ordinary unfair dismissal. This followed a government-facilitated negotiation between business representative bodies and trade unions which resulted in what the government described as a ‘workable package’. 

Alongside this announcement, the government also stated that:

• the compensation cap on ordinary unfair dismissal claims will be ‘lifted’ – it is unclear whether this means the compensation cap will be removed entirely or whether, for example, the restriction to 52 weeks’ pay may be removed but with the financial cap (currently set at £118, 223) remaining in place; and

• in future the unfair dismissal qualifying period will only be able to be varied by primary legislation which will make it more difficult for a future government to change. 

It is not clear from the announcement what will happen to the concepts of ‘initial period of employment’ or ‘lighter-touch process’ which had been proposed to alleviate the impact of unfair dismissal as a day one right. Reports suggest that these will fall away. 

What does this mean for the Bill?

It is yet to be seen if the House of Lords will drop its other amendments to the Bill as a result of this change or, conversely, if there will be any backlash from Labour MPs in response to the concession. Reports this week suggest that some Labour MPs may put forward an amendment that would stipulate a 2026 implementation date for the six-month qualifying period for unfair dismissal, which would otherwise be implemented in 2027 according to the government’s implementation roadmap. 

The Bill is due to go before both the House of Commons and the House of Lords next week so we should know more then, with some amendments likely published this week ahead of those debates. If both the Commons and Lords accept these amendments, and there are no further points of disagreement, then there is every chance that the Bill will be passed by Parliament before the Christmas break. 

Even before this government announcement, I have been reflecting on the Bill and its impact on employers after I recently attended the Westminster Employment Forum policy conference ‘Next steps for the Employment Rights Bill and priorities for implementation’. This was a conference packed with insight from government ministers, industry bodies, trade unions, government departments and public bodies including ACAS. 

As you might expect, those at the conference discussed the concerns from business about the significant impact and challenges the proposed changes will bring. The recent announcement goes some way to addressing what was a major concern; however, much of the detail relating to several key areas of reform (including zero/low hours contracts and collective redundancy consultation) is yet to be confirmed and will be contained in secondary legislation, so there remains significant uncertainty for employers. Indeed, the Secretary of State for Business and Trade, Peter Kyle, announced last week that 26 consultations relating to the Bill will be launched after Royal Assent to help shape the detail of the measures. 

Meanwhile the government has not proposed any changes to its implementation roadmap for the Bill (which was published in July 2025) and, at the conference, representatives from the Department for Business and Trade reiterated the government’s intention to stick to this timeline. It remains to be seen whether the unexpected delay to Royal Assent and the sheer scale of consulting on, and implementing, a large amount of secondary legislation will result in the timeline slipping. 

What does this mean for employers?

Whilst employers may, understandably, have been holding fire on preparations until the Bill is passed, the scale of reform and the quick turnaround for the earliest reforms mean that there are steps that can be taken now if you want to stay ahead of the steady stream of change which will follow the Bill becoming an Act. 

For example, in April next year, day one rights for paternity leave and unpaid parental leave are due to come into force which will likely require an update to employers’ policies. Important changes to statutory sick pay (SSP) are also expected from April when SSP will become payable from the first qualifying day of absence and the lower earnings limit for entitlement to SSP will be removed. 

Whilst some employers already pay sick pay from day one, employers who are affected by these SSP changes will need to take action ahead of April 2026 to ensure that payroll systems are updated, policies are revised and to plan their employee communications accordingly. 

Although the changes to unfair dismissal rights may not take effect until 2027, employers should review their recruitment, onboarding and probationary processes to reduce the risk of poor hiring choices and to ensure a proper assessment of a new recruit’s suitability and capability for a role can be carried out within the first six months of employment, leaving time to effect any dismissal within the requisite timeframe. 

For a comprehensive overview of the Bill’s reforms, please refer to our Employer's handbook to the Employment Rights Bill and beyond. 

We have been advising employers across all sectors on how they can plan for the new reforms. If you’d like to discuss how your organisation can prepare for these changes, please get in touch with me or your usual contact within our employment team.