Employment Edit: 4 December 2025

Legal Updates

Unfair dismissal

As we reported at the end of last week, the government announced last Thursday that the Employment Rights Bill will no longer make unfair dismissal a ‘day one’ right. Instead, the qualifying period for ordinary unfair dismissal claims will be reduced from two years to six months. At the same time, the government also indicated that it will ‘lift’ the compensation cap on ordinary unfair dismissal claims, although it remains to be seen what is meant by this.

Prior to the Bill returning to the House of Commons next Monday, we expect amendments will be published that will provide clarity on the government’s position (including what is meant by lifting the compensation cap). Reports suggest that a non-government amendment will also be put forward to try to guarantee a 2026 implementation date for the six-month qualifying period, rather than this reform waiting until 2027 as originally planned. In this blog post, Hannah Malone takes a closer look at the latest position on unfair dismissal and the progress of the Bill.

We are advising many employers on the steps they can take to prepare for the Bill’s implementation. If we can assist your organisation, please contact Luke Bowery or your usual Burges Salmon contact.

Pensions salary sacrifice

In the Autumn Budget, the government announced that it is going to introduce an annual £2,000 cap on National Insurance Contributions relief on pension contributions paid by salary sacrifice. Employers and employees will still be able to make pension contributions above the £2,000 annual cap, but those contributions will be subject to NICs at the normal rates (currently 15% for employers and 8% for employees on income from £12,584 up to £50,270 then 2% on income above £50,270).

With the cap set to take effect from April 2029, there is time for employers to look closely at their existing reward structures and consider what adjustments may be necessary to deal with or mitigate the impact of this reform. To read more about what the cap will mean for employers, check out the below blog post from our pensions team.

National Minimum Wage rates

Ahead of the Budget, the latest increases to the National Minimum Wage were announced. The rates again include an increase to the rate for 18- to 20-year-olds, as the government continues to narrow the gap between that and the full rate of National Living Wage (which is currently payable to those aged 21 and over). This is with the ultimate aim of having a single adult rate in place for all those aged 18 and over.

The new rates, which will apply from 1 April 2026, will be:

• £12.71 per hour for workers aged 21 and over
• £10.85 per hour for 18- to 20-year-olds
• £8 per hour for 16- to 17-year-olds and apprentices

Non-compete clauses

Last week, the Department for Business & Trade published a new working paper exploring options to reform non-compete clauses in employment contracts.

Broadly speaking, a non-compete clause prevents an employee from working for, or setting up, a competing business for a period of time after the termination of their employment with the relevant employer. To combat concerns that such clauses are a barrier to job mobility and innovation, the working paper sets out a range of different options for reforming non-competes. These include:

• introducing a statutory limit on the length of non-compete clauses (including the potential for the limit to vary by company size so that start-ups could take advantage of longer non-compete clauses to retain talent as they grow)
• banning non-compete clauses in employment contracts
• banning non-compete clauses below a certain salary threshold
• combining a ban below a certain salary threshold with a statutory limit

The consultation is set to close on 18 February 2026. Employers who rely on non-compete clauses (or their deterrent effect) will want to keep a close eye on developments in this area as they may need to review the non-compete and other employer protections in their contracts of employment.