Category: Employment Rights Act 2025

Categories
Acas Compensation Employment Law Employment Rights Act 2025 Kate Walsh Unfair Dismissal

Removing the statutory cap in unfair dismissal compensation: how will the UK compare to other countries?

The European Union flag, blue with yellow stars, flies in front of the EU Parliament

The Employment Rights Act 2025 was passed late last year, and you will be forgiven for trying to catch up with all the proposed developments — there are so many! One of the most significant is the removal of the statutory cap for the compensatory award in successful unfair dismissal claims (the cap is currently the lower of 52 weeks’ gross pay or £118,223).

The statutory cap will be removed at some point in January 2027

From the information currently available to us, it is likely to be 1 January 2027 on the same date that the qualifying period for unfair dismissal is reduced from 2 years to 6 months.

Once removed, how will the UK fare when compared to a very employee friendly Europe?

In most European counties, unfair dismissal compensation is capped. The aim is simple: balance fairness for employees with predictability for employers.

Let’s look at the different regimes:

  • France link compensation to length of service. Awards start at around three and a half months’ salary (for two years’ service) and cap at 20 months’ salary, even for long-serving employees. 
  • Switzerland limits compensation to six months’ salary. 
  • Sweden caps awards at 32 months’ salary, depending on service. 
  • Spain applies a formula of 33 days’ pay per year of service (for post-2012 hires) but again capped at 24 months’ salary.
  • Italy operates a dual system. Employees hired after March 2015 face capped awards of:
6 to 36 months’ salary for large employers.
3 to 18 months’ salary for small employers.
Following a Constitutional Court ruling, judges now have discretion within those ranges — but the cap remains firmly in place.
  • Ireland caps unfair dismissal compensation at 104 weeks’ total remuneration. 
  • Denmark applies caps under collective agreements (up to 52 weeks’ pay) or six months’ salary for salaried employees, depending on service. 

The common thread for most European countries — compensation is capped, and employers are able to plan negotiations accordingly. Beyond Europe, caps are still the norm. In Australia for example, the Fair Work Commission can award compensation for unfair dismissal but only up to six months’ salary.

The UK will be joining a handful of countries which have uncapped awards. In Luxembourg, judges are given a wide discretion with no fixed statutory cap. Canada has no formal statutory cap, but compensation is typically limited to damages reflecting the employee’s reasonable notice period, rather than open-ended loss. Lastly, in Brazil, employers are required to deposit 8% of the employee’s monthly salary into an account which is managed by the Federal Savings Bank on behalf of the employee. If an employee is dismissed without cause the employer must pay to the employee, (in addition to the payment of accrued rights and as a penalty for unfair dismissal) an amount equal to 40% of that which the employer has deposited into the employee’s severance compensation fund during their employment. The amount of the penalty will therefore depend on the length of employment and on the amount of the employee’s monthly salary.

It is clear that the UK will be joining the minority rather than the majority of countries who have uncapped unfair dismissal awards.

What are the repercussions of an uncapped compensation regime?

The statutory cap currently guides settlement negotiations with parties often negotiating around three to six months’ pay to avoid the time and costs attached to tribunal hearings.

Without the statutory cap:

  • Claimants may be more willing to take cases to a final hearing, adding to an overburdened tribunal system.
  • It is more difficult for employers to quantify the financial risk of a dismissal, which will inevitably impact settlement negotiations.
  • High earners are no longer deterred from lodging Tribunal claims meaning an increase in litigation for this group.
  • There is likely to be more complex remedies hearings that need to consider quantifying bonuses, deferred incentives and unvested equity.
  • Where the Acas Code applies, a potential 25% uplift suddenly bites harder when the underlying award is not capped.
  • On a positive note, it is likely to result in a reduction in more complex discrimination claims and whistleblowing claims as there will no longer be a need to bring these claims to avoid capped compensation.

How should you prepare?

Employers would be wise to start taking preparatory steps to tighten up procedures and ensure a clear document trail is in place. With an extended early conciliation period, plans to increase tribunal time limits for lodging claims and existing tribunal delays, tribunal witnesses will be placed under significant pressure to recall events which took place possibly two to three years ago. HR teams can make both their and witnesses’ lives a lot easier with clear processes and consistent decision making. 

CONTACT US

We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.

GET IN TOUCH

Kate Walsh
Refreshing Law

Categories
Dismissal Employment Law Employment Rights Act 2025 Lousha Reynolds Notice Periods Probation

The top questions we’re hearing from clients this month

Cut-out question marks on speech bubbles

Although there are a raft of changes as a result of the Employment Rights Act (see ERA Timeline), undoubtedly the change that our clients have the most questions about is the reduction to the qualifying period for unfair dismissal from 2 years to 6 months, which takes effect on 1 January 2027.

The two most frequently asked questions this month relate to this and are as follows:

1.  What impact do notice periods have on qualifying service under the new regime and do we have to include them when calculating qualifying service? 

As long as the employee has a pay in lieu of notice clause within their contract and you exercise that right; i.e. you pay them in lieu of their contractual notice period, the contractual notice period does not get added to their period of service. However, for employees who have been employed for over a month but for less than two years, the law adds one week when determining their period of qualifying service. This means that even if you do exercise the contractual right to pay in lieu of notice, you need to factor in this additional notional week. 

What that means in practice, is that you need to communicate dismissal decisions over a week before the six month qualifying period to avoid the employee being deemed to have 6 months service and a right to bring an unfair dismissal claim due to the notional week of service being added. 

2.  In view of the changes, what is the recommended duration for probationary periods?

We would advise between 3–4 months. For junior roles or where employees are on site full time/closely managed, a 3-month probationary period should be sufficient. You can also build in the ability to extend the probationary period for a further 6 weeks.

That said, we acknowledge that for the majority of our clients, it is difficult to properly assess suitability and performance within a 3-month period, particularly with hybrid working and for more senior roles. 4 months does still provide enough time for a short extension of the probationary period (we recommend 4 weeks) if this is required/or time in case meetings are delayed. However, where probationary periods are extended or meetings are delayed, it is important to remember to factor in the notional week referred to above to ensure that the employee does not have 6 months service at the time of the dismissal.

We recommend reviewing and updating the probationary periods in your existing contracts before issuing them to employees who commence employment on or after 1 July 2026. You should also check that your contracts include an appropriate pay in lieu of notice clause. In addition, it is vital to ensure that managers are fully briefed and trained on any changes to probationary periods and that they understand the importance of conducting the reviews in a timely manner.

CONTACT US

We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.

02920 599 993

07737 055 584

lreynolds@refreshinglawltd.co.uk

GET IN TOUCH

Lousha Reynolds
Refreshing Law

Categories
Collective Redundancy Employment Law Employment Rights Act 2025 Lousha Reynolds Redundancy

Consultation launched on the threshold for triggering collective redundancy obligations

View of the British Houses of Parliament from the river Thames, where the Employment Rights Bill is being debated

Collective redundancy obligations currently arise where an employer proposes to make 20 or more redundancies within a 90-day period at one establishment. Different sites, stores and warehouses are generally treated as separate establishments. As a result, large-scale redundancies carried out across multiple sites may not trigger the duty to carry out collective consultation.

Many considered that this was unfair and so when the proposed Employment Rights Bill was first introduced by the Labour government, it included the complete abolition of the threshold at any one establishment. However, during consultation, significant concerns were raised and as a result the 20-employee trigger at one establishment is set to remain.

Instead, and at some point, in 2027, the ERA 2025 will introduce an additional, alternative threshold test based on the total number of redundancies across the whole business. This means that if redundancies are made throughout the UK at more than one location then collective consultation obligations will apply if more than a certain number of jobs are affected.

Last Thursday (26 February 2026), the Government launched a consultation on what this new organisation wide threshold for triggering collective redundancy obligations should be.

The Government is considering two options:

  • Using a single fixed number in the range of 250 to 1000. 
  • Introducing a tiered system, based on the size of the employer:
250 redundancies for organisations with 0 to 2,499 employees.
500 redundancies for those with 2,500 to 9,999 employees.
750 redundancies for those with 10,000 or more employees.

The Government’s preferred approach is the single fixed number. This does appear to be the easiest way to ensure that employers understand their obligations, and that employees and trade unions are certain when they are entitled to participate in collective redundancy consultation. 

Interestingly, the thresholds are much higher than many informed commentators predicted so perhaps this is an area where Labour are listening to concerns about the impact that the raft of reforms will have on businesses and the wider economy.  If you want to engage in the consultation, it can be accessed via the following link here and is open until 21 May 2026.

CONTACT US

We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.

02920 599 993

07737 055 584

lreynolds@refreshinglawltd.co.uk

GET IN TOUCH

Lousha Reynolds
Refreshing Law

Categories
Employment Law Employment Rights Act 1996 Employment Rights Act 2025 Lousha Reynolds

Employment Rights Bill update — Where are we now?

View of the British Houses of Parliament from the river Thames, where the Employment Rights Bill is being debated

The recent ministerial reshuffle, which saw the departure of three key supporters of the Employment Rights Bill (Angela Rayner, Justin Madders and Baroness Jones), left many wondering how this would affect the Bill’s progress. Questions were raised about whether the Government might water down or backtrack on some of the more contentious reforms, particularly the day-one right to unfair dismissal and new duties on employers regarding zero- and low-hours workers.

However, on 15 September 2025, the Employment Rights Bill entered its final parliamentary stages. The House of Commons rejected several significant non-government amendments proposed by the House of Lords, signalling the Government’s determination to press ahead with its core commitments.

Key developments in the Employment Rights Bill

Many of the proposed reforms raise questions about how they will operate in practice. While the Lords suggested several sensible amendments that could have simplified implementation, these were largely rejected, given their conflict with key Labour manifesto pledges.

Below is a summary of the main points:

Day-one unfair dismissal rights

The Bill abolishes the current qualifying period for unfair dismissal, introducing protection from day one of employment. This change adds complexity, particularly regarding the initial employment period and the scope of the proposed “light touch procedures.”
The Lords had proposed reducing the qualifying period to six months to simplify the system; a suggestion that was ultimately rejected.

Guaranteed hours contracts

The Commons reinstated the original duty on employers to proactively offer guaranteed hours contracts. The Lords had proposed a less stringent “right to request” model, but this amendment was not accepted.

Whistleblowing reforms dropped

Plans to extend unfair dismissal protection for whistleblowers and introduce new duties for employers to investigate disclosures have been removed from the Bill.

Right to be accompanied unchanged

Employees will continue to be entitled to be accompanied only by a trade union representative or colleague during disciplinary or grievance meetings. The Lords’ proposal to expand this to include a “certified professional companion” was rejected.

Ballot thresholds abolished

The requirement for a 50% turnout in industrial action ballots will be removed, despite efforts by the Lords to retain it.

Non-disclosure agreements (NDAs)

A ban on NDAs relating to complaints of discrimination and harassment was added to the Bill in July 2025. The Government has confirmed it will consult “as quickly as possible” on the secondary legislation required to implement this measure.

Next steps for the Employment Rights Bill

The Bill now returns to the House of Lords for consideration of the Commons’ position; a stage commonly referred to as “ping pong”, as both Houses must reach agreement before the Bill can receive Royal Assent.

Given that both Houses are in recess until 12 October 2025, Royal Assent is expected later in October. However, most major provisions, including reforms on fire and rehire, day-one unfair dismissal, and zero-hours contracts, are not expected to take effect until Autumn 2026 or 2027. Therefore, a short delay is unlikely to have any material impact.

What employers should do now

Although these significant reforms are a step closer to becoming law, much of the practical detail employers need will come through secondary legislation. The Government is expected to consult this autumn on key areas of change.

With so many reforms and ongoing uncertainty, it can be challenging for employers to stay up to date. We recommend:

  • Monitoring developments as the Bill progresses through Parliament
  • Preparing for upcoming consultations and future compliance obligations
  • Reviewing internal policies and procedures to identify potential areas of impact

We will continue to track progress and provide timely updates as new information emerges.

If you would like to discuss what the Employment Rights Bill 2025 means for your organisation, or how we can support you with tailored training, practical advice, or implementation planning, please get in touch at lreynolds@refreshinglawltd.co.uk.

Lousha Reynolds
Refreshing Law

Categories
Employment Law Employment Rights Act 1996 Employment Rights Act 2025 Lousha Reynolds

Implementing the Employment Rights Act — A roadmap for delivering change

View of the British Houses of Parliament from the river Thames, where the Employment Rights Bill is being debated

The Employment Rights Bill was published on 10 October 2024. It introduced 28 significant reforms and the much publicised and highly contentious changes have been identified as reshaping the landscape of employment law.

On 1 July 2025, the UK Government published its official Employment Rights Bill implementation roadmap detailing when new employment protections will come into force. The comprehensive reforms will be rolled out with a phased approach between 2026 and 2027, with some immediate changes triggered upon Royal Assent (expected Autumn 2025).

Phase 1: On Royal Assent (autumn 2025)

Once the Bill becomes law, the following will take effect immediately or soon after:

  • Repeal of most of the Trade Union Act 2016
  • Repeal of the Strikes (Minimum Service Levels) Act 2023
  • New protections against dismissal for those participating in industrial action, and simplified union ballot procedures

April 2026 — Key employer mandates begin

From the 2026/27 tax year, starting in April 2026, the following reforms are scheduled:

  • Doubling of the maximum collective redundancy protective award (from 90 to 180 days pay)
  • Day‑one entitlement to paternity leave and unpaid parental leave
  • Enhanced whistleblowing protections
  • Establishment of a new Fair Work Agency (although it is unclear when this body will be up and running)
  • Statutory Sick Pay reform (removal of lower earnings limit and 3 day waiting period)
  • Simplified trade union recognition rules, digital and workplace balloting introduced

October 2026 — Workplace regulation intensifies

  • Ban on “fire‑and‑rehire” strategies
  • Obligation on employers to take “all reasonable steps” to prevent sexual harassment
  • Employers to be held liable if employees are harassed by third parties.
  • New Tribunal claim deadline extended from 3 to 6 month
  • Expanded union rights

2027 — Final roll-out of key rights

  • Day‑one protection against unfair dismissal
  • Mandatory gender pay gap reporting enhancements and menopause action plans
  • Rules restricting the dismissal of pregnant workers and expanded bereavement leave
  • Extension of flexible working rights
  • Restrictions on zero‑hours contract misuse (including new guaranteed hours offer)
  • Expansion of collective redundancy thresholds and new umbrella‑company regulation

Consultation timeline

To refine these reforms, the government plans the following consultation windows:

  • Summer / autumn 2025: on day‑one unfair dismissal, fire‑and‑rehire, bereavement leave, pregnant workers’ rights, zero‑hours contract restrictions.
  • Winter 2025 / early 2026: on flexible working reforms, collective redundancy changes and changes to the laws on tipping.

Summary table

Implementation dateChange
Upon Royal Assent (autumn 2025)Union law repeals & dismissal protections
April 2026Redundancy award doubling, day‑one paternity/parental leave, SSP reforms, whistleblowing protections, union recognition, Fair Work Agency
October 2026Ban on fire‑and‑rehire, “all reasonable steps” harassment duty, tribunal deadline extension, expanded union access
Sometime in 2027Day‑one unfair dismissal, gender pay/menopause plans, zero‑hours reform, bereavement leave, flexible working, pregnancy rights, umbrella regulation

Practical impact

The timetable produced is undoubtedly helpful as it provides clarity and enables organisations to structure their preparations in a more realistic way. It is also reassuring to have conformation that (for most businesses), very few changes will take effect in 2025, unless you are facing potential industrial action.

However, whilst 2025 may feel like a pause in legislative change, it’s really the calm before a period of major reform. The government’s decision to delay the most significant measures until 2027 offers some breathing room—particularly for employers already grappling with difficult trading conditions. That said, this breathing space should be used wisely. Preparations to update payroll systems (for SSP and parental leave) and to update handbooks and consultation protocols should take place.

Further, with key consultations launching this year, including proposals on day one unfair dismissal rights and guaranteed hours, we will obtain more clarity on what the future legal landscape will look like. Details such as what constitutes a “light-touch” dismissal process, or how many hours will lift workers out of new protections, are key outstanding issues that will be confirmed.

In summary, 2025 may bring fewer immediate changes, but it will be a crucial year for engagement and preparation. Employers, HR professionals, and legal teams should stay alert and keep an eye on the developments because the groundwork laid now will determine how well you are able to navigate the more complex changes coming in 2026 and 2027.

Lousha Reynolds
Refreshing Law

Categories
Anna Denton-Jones Employment Law Employment Rights Act 1996 Employment Rights Act 2025

Planning ahead for the Employment Rights Bill

View of the British Houses of Parliament from the river Thames, where the Employment Rights Bill is being debated

In this blog I wanted to pick an area which will affect all employers when the new Act that is going through Parliament comes into force.

Sickness absence is a perennial issue that all employers have to manage.

From, likely April 2026, employees will receive Statutory Sick Pay from the very first day they are off work. At the time of writing this they would have to wait three ‘waiting days’ and not get paid until day four. For employers paying statutory sick pay only or perhaps small sums of company sick pay of a few days before employees revert to statutory sick pay, these ‘waiting days’ have acted as a deterrent to misusing sick leave, as the genuinely ill are not paid for short-term absences. This has deterred the odd day for ‘flu’ or a stomach upset. The Employment Rights Bill eliminates the three-day waiting period, removing the deterrent.

The Employment Rights Bill also removes the lower earnings threshold. This means everyone, no matter what hours they work – will now qualify for Statutory Sick Pay if they are sick. This captures more casual and part-time workers who historically may not have earnt enough to qualify. SSP will be calculated at 80% of their normal weekly earnings, subject to a cap of £118.75 which is the current rate of SSP for a week, and which increases each year, so is likely to be a few pounds greater by the time this change comes into force.

The combined effect of these two measures is more people qualifying for sick pay more often. Not only does that have a cost implication but it means you will need to review the measures you take to review absence and manage it.

Time to dust down your sickness absence policies, trigger points and monitoring of absence patterns. Often these are tools we have in our kit bag but aren’t using properly. A time-honoured method that yields the best results for managing absence is the return to work interview, yet often managers haven’t been trained how to do them with confidence.

Let us know if we can help you overhaul what methods you are using to manage sickness by contacting Anna at adenton@refreshinglawltd.co.uk.

Anna Denton-Jones
Refreshing Law

Categories
Anna Denton-Jones Employment Law Employment Rights Act 1996 Employment Rights Act 2025 Video

Video | Employment Rights Bill 2024-25

YouTube video playing on a phone

The Employment Rights Bill was introduced to Parliament on 10 October 2024.

The aim of the bill is to modernise employment rights legislation. Anna has prepared a number of videos which outline some of the changes the bill introduces:

This video discusses the duty to prevent sexual harassment and can be found here.

This video discusses the initial period of employment and can be found here.

This video discusses the removal of the 2 year qualifying period to claim unfair dismissal and can be found here.

This video discusses the position as regards the impact on redundancy and can be found here.

This video discusses the position as regards collective redundancy – so large scale redundancy and can be found here.

The videos were recorded on 30.10.2024.

Anna Denton-Jones
Refreshing Law