National Minimum Wage Set for Significant Rise in April 2026
26 November 2025
Employment Rights Act 2025 is now law: what employers need to know, what’s live now, and what’s coming next.
17 December 2025National Minimum Wage Set for Significant Rise in April 2026
26 November 2025Employment Rights Act 2025 is now law: what employers need to know, what’s live now, and what’s coming next.
17 December 2025Employment Rights Bill: Six-Month Unfair Dismissal Threshold Confirmed — and Cap on Compensation Set to Be Removed
The Government has now published its formal amendments to the Employment Rights Bill, confirming two significant changes to the unfair dismissal framework.
First, the qualifying period for ordinary unfair dismissal will reduce from two years to six months. This shifts dismissal risk much earlier in the employment relationship and will require employers to apply fair, well-documented processes from the outset of employment.
Second, and more substantially, the Government has proposed the complete removal of the statutory cap on the compensatory award for unfair dismissal. The amendment explicitly omits section 124 of the Employment Rights Act 1996, meaning unfair dismissal compensation would become uncapped if the Bill passes through the House of Lords unchanged.
Until the Bill completes its legislative stages, the current caps and rules remain in force.
What these changes mean for employers
The combined impact of a shorter qualifying period and an uncapped compensatory regime significantly increases potential exposure where dismissals are not handled correctly.
Earlier risk exposure
With eligibility arising at six months, organisations will need to review probation frameworks, ensure timely reviews and maintain strong documentation from day one.
Greater financial liability
Removing the cap could lead to:
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Higher-value claims from senior employees or high earners
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Increased use of long-term or career-loss calculations, particularly for older workers or those with limited re-employment prospects
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More claims progressing to tribunal rather than settling early
Stronger expectations of process
Even within the first six months, tribunals may scrutinise:
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Reasonableness of the employer’s decision
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Consistency of treatment
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Whether concerns were raised and addressed properly
Employers with inconsistent or informal early-stage processes are likely to feel the impact most acutely.
Practical HR actions to begin now
Although the Bill is not yet law, these changes are material enough that HR leaders should prepare early:
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Review probation procedures, including milestones, review templates and escalation routes
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Strengthen documentation standards for early performance and conduct concerns
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Refresh manager training on fair process and record-keeping
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Revisit dismissal checklists and internal guidance to ensure compliance once six-month eligibility is in place
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Assess settlement strategies and risk-based decision-making in light of uncapped awards
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Monitor legislative progress closely, particularly the Bill’s passage through the Lords
Preparing now will help ensure a smooth transition once final implementation dates are confirmed.
The Government has now published its formal amendments to the Employment Rights Bill, confirming two significant changes to the unfair dismissal framework.
