Latest updates to the Employment Rights Act
After an extended back and forth between the House of Commons and the House of Lords, the long-awaited Employment Rights Bill is now the Employment Rights Act. What does that mean for businesses? Join us for a quick roundup of some of the changes.
The big one – unfair dismissal rights. Do employees now have day one rights? No.
However, the suggested form of day one unfair dismissal rights was never quite as bad as it appeared. In earlier drafts of the Bill, while it did include a day one right for the employee not to be unfairly dismissed, it also allowed for a six-month ‘initial period of employment’ enabling employers to use a much shorter dismissal process. If you squint slightly, it looks a lot like a six-month qualifying period. Six-month qualifying periods have existed in the past, so the concept may be familiar to many employers. The final version of the Bill was much the same as the previous ‘day one’ versions. The way they have retained the current legislation potentially provides more certainty for business – instead of a completely new process with new rules, this version just moves the existing framework forward a bit. The new unfair dismissal provisions are due to start being implemented from 2026, having previously been scheduled to take place in 2027.
One of the last-minute changes has been on the removal of the statutory cap on the compensatory award. Scary in principle, less so in practice. It is rare for a Tribunal to award the full cap on a year’s wage as it stands, so removing the cap is unlikely to produce a large volume of bigger claims. Discrimination and automatic unfair dismissal claims are already uncapped and attract injury to feelings awards and while there are some big wins that make the news, the sky remains in place. Most of the time, an employee will be able (or should have been able) to find another job on similar pay within the 12 months the current cap provides. A consultation on the issue has been promised,, so we will have to wait and see the findings. To be clear, the change relates to the statutory cap on compensatory awards for unfair dismissal; damages for breach of contract are a separate claim. While this change may incentivise higher paid individuals to bring unfair dismissal claims, the cap of £25,000 on breach of contract is likely to still produce additional litigation in the civil courts.
Guaranteed hours, fire and rehire, and trade union rights appear to be, where the issues for business are most likely to arise. These are new legal rights rather than tweaks to existing rights and with new rights come new territory for employers and Tribunals. We will have to keep an eye on how this unfolds.
A short note on other day one rights. Statutory Sick Pay waiting days and certain parental type rights are being moved to day one entitlement, with those changes scheduled to take effect from April 2026.
If you’re an employer or an HR professional and need some guidance from a legal perspective, please get in touch.
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