The stalemate is over. With Royal Assent imminent, businesses must prepare for major reforms, including sick pay changes, fire-and-rehire rules, and unfair dismissal updates.
Last month, I shared an update on what appeared to be a stalemate over the Employment Rights Bill. A game of ping-pong between the two Houses – Lords and Parliament, where the Lords would remove key government provisions and send it back to Parliament, and Parliament would reinstate them and send it back to the Lords. Most notably, the House of Lords insisted on retaining a six-month qualifying period for unfair dismissal, whereas Labour sought to make it a day-one right. Labour have finally agreed to the Lords’ request, but on the condition that the cap on unfair dismissal compensation (previously the lesser of one year’s salary or £118,223) is removed entirely.
The revision has been portrayed as a dilution of the government’s original proposals, but in practice it could have a more significant impact on employers. Under the initial plan, a statutory probationary period of nine months was envisaged, during which a simplified process would have applied for fair dismissal. The updated provisions shorten this period, granting employees full unfair dismissal protection after six months rather than nine. In addition, the removal of the cap on compensation for claims is expected to substantially affect high earners and reshape the dynamics of settlement negotiations.
This breakthrough means the Bill is set to pass into law imminently, with Royal Assent (the King’s rubber stamp) expected this week. Following this, attention turns to the government’s proposed implementation roadmap. Although it has yet to be formally updated to reflect the last-minute changes, the anticipated key dates are as follows: changes to the Statutory Sick Pay regime are scheduled for April 2026; revisions to fire-and-rehire rules and an extension of standard claim expiry dates from three months to six months are set for October 2026; and amendments to unfair dismissal are expected in 2027. These are just a select few of the many changes being introduced, full details of which can be found here. We will also be explaining the changes in more detail in our free Annual Employment Law Update seminar.
What do all these changes mean, though? For Labour and the Trade Unions, it has been described by Sir Keir Starmer as “the biggest upgrade to workers’ rights in a generation”, echoed by Paul Nowak (General Secretary for the TUC) who likened the Bill to a “watershed” moment for worker and unionist rights. On the flip side, Andrew Griffith – the Shadow Business Secretary – was more sceptical: “[The bill] will pile costs onto small businesses, freeze hiring, and ultimately leave young people and jobseekers paying the price”.
Regardless of what you might think about it, though, the “Bill” is about to become “law”. If you’d like a consultation or any support to ensure your business is well-prepared for these changes, please feel free to get in touch.
