We don’t usually provide technical updates in December, but with big updates since November, we wanted to keep you informed. Not long after we submitted our update, the Government announced that they would compromise on unfair dismissals, agreeing to reduce the time an employee must wait to obtain this right from two years to six months, instead of immediately gaining the right from day one, after discussions with key groups.
In these discussions, the concession on unfair dismissal rights was agreed in conjunction with a lifting of the cap on compensatory awards for unfair dismissal. Depending on sources, there has been confusion on the interpretation of “lifting”, with some believing it to mean increasing the potential amount awarded instead of the complete removal that the Government have proposed.
Parliamentary debate and what’s next
These amendments were made when the Commons discussed the Bill on 8th December and then put to the Lords on 10 December. The Lords disagreed with the abolishment of the cap and continued Parliamentary ping pong.
In a bid to pass the Bill before Christmas, the Bill was scheduled to be discussed in the Commons on 15 December and the Lords on 16 December. Six key business groups wrote an open letter to the Government, urging for the Bill to be passed. Whilst the Lords were still unhappy with the last-minute addition of the removal of the compensatory cap, the open letter was repeatedly cited in a short debate and the Lords consented to the Bill’s passage, finally ending ping pong. It is expected that the Bill will achieve Royal Assent in the coming days to become the Employment Rights Act 2025.
Here's an update on those last few proposals.
Existing items:
Unfair dismissal
- The Commons has agreed to the Lords’ amendment to a 6-month qualifying period.
Zero-hours contracts
- The Commons has agreed to consult on the reference period before defining in secondary legislation.
Seasonal work definition
- The Commons has agreed to consultation with affected parties to ensure the legislation works for seasonal industries.
Trade union ballots
- The Commons have agreed not to remove the 50% ballot threshold until the impact of introducing e-balloting has been assessed.
Trade union - political funding
- The Secretary of State will issue guidance on Trade Union rules regarding member rights to opt out of political funding, the Lords voted not to push back on this.
New item:
Lifting of cap on Compensatory Awards for unfair dismissal
- Currently, the compensatory award for a successful claim of unfair dismissal is capped at 52 weeks’ pay or fixed statutory amount (current rate of £118,223), whichever is lower.
- Any changes to the cap would affect the possible amount to pay in a tribunal claim, impacting assessments on financial risks of dismissal and calculations of settlement amounts, where used.
- The Commons proposed that the compensatory cap be abolished.
- The Lords initially proposed that a review be carried out into the compensation caps within three months of the Bill passing and instead that the Secretary of State be granted the power to abolish the compensation caps as an “amendment in lieu.”
- The Commons insisted that the caps be removed, and the Lords have now consented to its passing.
We’ll continue to keep you updated in the new year as secondary legislation is formed.
