New caps on dismissal compensation
The Employment Rights (Increase of Limits) Order 2026 includes the... Read More
Employment Rights Bill passes into law
After months of parliamentary review, the Employment Rights Bill has finally passed through the House of Lords and has received Royal Assent, allowing the Bill to pass into law as the Employment Rights Act 2025.
We reported previously that the government had agreed to drop “day one” unfair dismissal rights in order for the Bill to pass. There was still parliamentary debate concerning the government’s late proposal to remove the cap on the compensatory award for unfair dismissal claim (which is currently the lower of an employee’s yearly gross salary or £118,223).
The House of Lords had originally included an amendment preserving the compensatory cap, but the House of Lords withdrew this final amendment to the Bill, allowing the Bill to pass on 16 December before receiving Royal Assent on 18 December 2025.
What next for employers?
Royal Assent having now been given, The Employment Rights Act 2025 is now law, but the most significant reforms introduced by the Bill will not take effect immediately. Instead, implementation is currently expected to be phased:
- From April 2026 (at the earliest): changes such as day-one entitlement to statutory sick pay and paternity/parental leave
- From 2027 (at the latest): reforms including the new six-month qualifying period for unfair dismissal claims and the duty to offer guaranteed hours
Other changes that will be introduced by the Act in due course cover an effective ban on ‘fire and rehire’ practice, enhanced collective consultation obligations and enhanced trade union rights.
It is also expected that there will be a number of consultations on matters covered by the new Act which will impact the regulations on a number of matters (including the reintroduction of third-party harassment).
The Employment Rights Act 2025 will have a range of far-reaching consequences on businesses, and the impacts it will have on the ways in which they run their staffing operations will be very significant and diverse. There is now an extra imperative on employers to make sure their managers have the knowledge and training required to lawfully and effectively manage employment arrangements.
We will provide updates next year documenting the changes to the law as they are due to come into force and what employers can do to prepare.