After several rounds of parliamentary ping pong, the House of Lords has finally conceded and agreed on the final version of the Employment Rights Bill (ERB). The ERB will now be put forward for Royal Assent, which is expected to be granted just in time for Christmas.
What has been decided?
Last week, both Houses of Parliament agreed a six month qualifying period for protection from unfair dismissal. The one remaining sticking point was the government's proposal to completely remove the cap on the unfair dismissal compensatory award (see our previous alert here).
The House of Lords had initially sought to push back on this. However, on 15 December 2025, the House of Commons rejected the Lords' position and the government published an open letter it had received from the business representative groups, along with its response to that letter. In its response, the government emphasised the need for the ERB to be passed without further delay, and committed to continuing to negotiate with unions and business groups moving forwards. In the debate in the House of Lords, the government also committed to publishing an impact assessment on the removal of the cap before bringing it into force. In light of these commitments, the House of Lords today (16 December 2025) conceded and agreed to the government's proposal.
What does this mean for employers?
Unfair dismissal changes
The government has indicated that it intends to produce regulations in 2026 to bring the change to the qualifying period into effect from 1 January 2027. This means that any employee whose dismissal takes effect on or after that date, and who has at least six months' continuous service at the date of their dismissal, will be able to bring a claim for unfair dismissal.
Employers will therefore need to revisit their recruitment processes in the first few months of 2026, to ensure that they work effectively to select the right people with appropriate skills. Employers may consider lengthier recruitment processes and/or changes to interviews and assessment centres. They will also need to review their approach to probation periods in their contracts for new joiners, to ensure that their duration is suitable in light of the six month qualifying period for unfair dismissal protection.
We assume that the government will seek to bring the removal of the cap on the compensatory award into effect at the same time as the change to the qualifying period. The potential for significantly higher value unfair dismissal awards makes it all the more important for employers to ensure that any processes they have in place to effect dismissals (e.g. disciplinary, performance, capability) are both robust and properly understood and applied by dismissing managers.
April 2026 changes
With Royal Assent now expected before Christmas, the government is likely to be able to stick to its roadmap for implementation of the following measures in April 2026:
- Maximum protective award for failure to comply with statutory collective redundancy consultation requirements to double, from 90 to 180 days' pay per affected employee
- Statutory paternity leave and unpaid parental leave to become "day one" rights, and employees to be able to take paternity leave before or after shared parental leave
- Disclosure of a concern about sexual harassment to amount to a protected disclosure for the purposes of whistleblowing protection, provided other criteria for protected disclosures (e.g. reasonable belief in public interest) are satisfied
- Statutory Sick Pay (SSP) to be payable from the first day of an employee's sickness absence, and lower earnings limit for SSP eligibility to be removed
Employers will need to review and update relevant policies and ensure that they train HR and line managers so that they are prepared for these changes to come into force.
The roadmap also states that changes to trade union recognition and workplace balloting will take effect in April 2026. However, the government is currently consulting on electronic and workplace balloting, and still needs to consult on changes to union recognition before it can produce regulations to bring these changes into effect. Although not impossible, meeting the April 2026 timeframe for these changes is therefore likely to be challenging.
Employers who need advice on any of the above should get in touch with their usual DAC Beachcroft contact.
