A clear, practical update
Over the past 48 hours, headlines around changes to the Employment Rights Bill have been loud, contradictory and in some cases deliberately dramatic. Words like “bloodbath”, “bonkers” and suggestions that employers will suddenly become “cold-blooded” make for clickable stories, but they don’t help business leaders understand what is actually changing. It all coincides with the disgraced former Deputy PM, Angela Rayner, emerging from the shadows – she is a strong advocate for these changes and has lots of back bench support so expect things to move at pace now.
So, in light of this, here’s the position in plain English.
- What has the Government actually proposed?
The House of Lords and Commons are well advanced in two sections of the Employment Rights Bill which Employers should take notice of:
Unfair dismissal compensation would become uncapped
The amendment proposes to remove section 124 of the Employment Rights Act 1996, which currently restricts compensatory awards for unfair dismissal (capped at the lower of £124,997 or 52 weeks’ pay for 2024/25).
If passed, unfair dismissal compensation would be unlimited, similar to discrimination or whistleblowing awards.
This is not yet law. It must still pass through the House of Lords.
The qualifying period would reduce from 2 years to 6 months
Section 108 would be amended so that:
- The current 2-year qualifying period becomes 6 months, and a ‘light touch’ procedure to justify reasons for dismissal may be required.
This change is proposed to take effect from 1 January 2027, but if MP’s get their way it could happen as soon as April 2026.
This means most employees will gain unfair dismissal protection far earlier than they do now.
- What stays the same?
Several protections and processes do not change:
- Employers can still manage performance without too much bureaucracy during an employees first 2 years of service.
- Genuine performance, conduct and business-related dismissals remain lawful when handled fairly.
- The basic award for unfair dismissal still has limits.
- Redundancy rules do not suddenly become more complex.
- Claims must still be proven, and tribunals still assess reasonableness.
There is no requirement to avoid hiring or accelerate dismissals.
- What about zero-hours, variable workers and union access?
The Bill also includes measures to:
- Ensure irregular-hours and zero-hours workers are not excluded from these new rights.
- Introduce financial penalties for employers that unreasonably prevent unions from speaking to workers.
- Should employers be worried? No — but they should be prepared.
This is not a moment for panic. It is a moment for planning.
The biggest shift, earlier access to unfair dismissal, means organisations will need:
- Clear, documented probation processes
- Early performance management, such as a Performance Improvement Plan or Occupational Heath review
- Strong record-keeping – while still data protection compliant
- Line managers trained to deal with capability and performance
- Robust recruitment practices
Nothing here is new — it’s the DNA of a well-run organisation.
- What employers shouldn’t do
- There is no need for “mass dismissals before the changes”. Just get your processes in order and align cultures to be fair and consistent
- There is no legal obligation to fire underperformers sooner.
- Restructures and dismissals after the law changes still remain lawful with proper processes.
- Our view as a trusted, practical voice in employment compliance
A fair, consistent, well-documented process will continue to protect employers — capped or uncapped.
Organisations most affected will be those without structured HR support or those delaying performance conversations.
If that sounds familiar, now is the right time to strengthen internal practices, not in 2027.
- What happens next?
- The amendment moves to the House of Lords.
- It may be accepted, rejected or amended.
- A commencement date will follow if it becomes law.
We’ll continue to update you, minus the drama.