The Employment Rights Bill: Almost here?

The Employment Rights Bill represents the biggest change to employment law in decades and will impact employers of all sizes and all sectors. This update will therefore be relevant to all HR professionals and managers in all TMGs.

In our last update, we confirmed that the Government had dropped its proposal to introduce “day one” protection from unfair dismissal and instead agreed to the House of Lords amendment to reduce the qualifying period from two years to six months. It was hoped that this compromise would be enough to ensure the Bill would finally receive Royal Assent and become law.

Unfair dismissal cap

In a surprise move it was also announced that cap on compensation would be lifted. Initially it was unclear whether this meant that there would be no cap on compensation or if the current 52-week cap would be removed but the monetary cap (currently £118,223) would be retained.

Back to the House of Commons

The Bill returned to the House of Commons on 8 December 2025, where it was clarified that the cap on compensation would be removed entirely, meaning there would be no limit on ordinary unfair dismissal compensation bringing it in line with discrimination and whistleblowing.

Other amendments were also made in relation to the outstanding points of contention, namely guaranteed hours contracts, industrial action ballot thresholds and Trade Union political funds. All amendments were passed by the House of Commons and the Bill returned to the House of Lords yesterday (Wednesday 10 December 2025).

What did the House of Lords say?

The House of Lords accepted the majority of the Government’s amendments, meaning:

• Unfair dismissal: The qualifying period will be reduced from two years to six months and will come into force on 1 January 2027.
• Guaranteed hours offer: Employers will be under a duty to proactively offer a guaranteed hours contract to zero/low hours workers. However, before regulations are made setting out the detail of how this duty will work in practice the government must consult on the reference period which will used to define who qualifies for the right and what counts as a “temporary need” in relation to seasonal work.
• Industrial action ballot thresholds: The current 50% turnout requirement for industrial action ballots will be abolished. However, the government will have a statutory duty to have regard to any effects of electronic balloting (which is currently under consultation).
• Trade Union political funds: Trade union members will be automatically opted in to a Trade Unions political fund. However, how opt-out notices will take effect has been refined and the government will be under a statutory duty to issue guidance.

The sticking point now is the removal of the cap on unfair dismissal compensation. The House of Lords voted to narrowly reject this amendment but have instead suggested an amendment that would obligate the Government to conduct a “review” of the cap within three months of the Bill passing.

Next steps

For now, at least ping-pong continues as the Bill will have to once again go back to the House of Commons. Whether this will happen before the Christmas recess begins on 18 December 2025 remains to be seen, although it’s likely that Bill will finally pass when it does go back. However, as set out in our previous article, relatively few of the Bill’s provisions will come into force immediately. 

We’ll continue to keep a close eye on the Bill and provide further updates in due course. In the meantime, if you’d like to view our recent webinar setting out what's changing, when it takes effect, and the practical steps you can take now to prepare your business with confidence please see our Employment Rights Bill: An overview for employers event recording.