The game of Parliamentary ping pong is over – agreement has been reached between the Commons and the Lords on the Employment Rights Bill (ERB).
As you may remember from our earlier Legal Update, the final point of contention was whether to remove the cap on compensation for unfair dismissal. The Lords have backed down and agreed to the removal, with the government committing to publishing an impact assessment on the removal of the cap before bringing it into force.
The ERB now awaits the formality of Royal Assent, which is scheduled for today, with the changes planned to come into effect in stages. This will help to give businesses time to prepare.
Many of the changes require commencement regulations to be made before they come into force, and we don’t yet have a full picture of how all the changes will operate, as many of them, such as guaranteed hours offers for zero hours / low hours workers, require regulations to be made to set out the details, as well as consultation.
We will be taking a closer look at the ERB changes in due course to help your business prepare, but for now, here’s a headline reminder of four of the key changes that are likely to be of interest to most employers:
- Unfair dismissal/compensation cap
- Day one rights
- Guaranteed hours offers for zero/low hours workers
- Increased amount of time to bring an employment tribunal claim
Unfair dismissal/compensation cap
The qualifying period for unfair dismissal will be reduced from two years of continuity of service to six months. The government 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.
As mentioned at the start of this Legal Update, the cap on compensation for unfair dismissal is also to be removed; it seems likely that this will coincide with the change to the qualifying period for unfair dismissal.
Day one rights
In April 2026, paternity leave and unpaid parental leave are to become ‘day one rights’, and Statutory Sick Pay (SSP) is to be payable from the first day of an employee’s sickness absence, and the lower earnings limit for SSP eligibility is to be removed.
Guaranteed hours offers for zero / low hours workers
Employers will usually be required to make an offer of guaranteed hours to a qualifying zero hours/low hours worker after the end of every reference period (yet to be determined), if the hours regularly worked exceed the minimum number of hours in their contract. This is expected to take effect in 2027.
Increased amount of time to bring an employment tribunal claim
The time limit for bringing an employment tribunal claim is doubled for most types of claim – increasing from three to six months. This is expected to take effect in October 2026 and could lead to a rise in the number of claims made to an already stretched employment tribunal service, as well as increasing uncertainty for employers who may not find out for a longer period of time whether their business will be facing a claim.
We will keep you updated on developments related to the ERB.
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