The Employment Rights Bill – Another Twist in the Tale (and Still No Agreement)

It’s been a busy time for the Employment Rights Bill (ERB) as it’s been back to the Commons and then the House of Lords in quick succession as the government tries to get it passed before Christmas. 

The result? A mixed bag for businesses with changes to the unfair dismissal qualifying period being welcomed and the Lords changing their position on guaranteed hours offers for zero/low hour workers. The major sticking point is now the government’s plan to remove the cap on compensatory awards for unfair dismissal – this has now been rejected by the Lords.

As such, the ERB has still yet to be agreed, and the game of Parliamentary ping pong continues with the ERB headed yet again back to the Commons.

We take a brief look at some of the recent key developments below:

1. Unfair dismissal qualifying period
2. Guaranteed hours offers for zero/low hours workers
3. The cap on the unfair dismissal compensatory award

Unfair dismissal qualifying period 

As you will undoubtedly remember, the government are now proposing a six month qualifying period for ordinary unfair dismissal, following talks with unions and business leaders. This development has been welcomed by the House of Lords (although the government’s proposed clause has been subject to an amendment by the Lords in respect of the cap on the unfair dismissal compensatory award).

There has been some speculation about when the government were planning on bringing the change to the unfair dismissal qualifying period into force. However, earlier this week in the House of Commons it was said that the planned commencement date was 1^st January 2027, with commencement regulations to be made “early next year” (subject to the ERB being passed). The Under Secretary for Business and Trade also went on to say that:

“Our intention is to adopt a commencement approach that would extend protections immediately from [1^st January 2027] to employees who already have six months’ service or more. For example, under this proposal, someone employed from today will gain protection against unfair dismissal on 1 January 2027. That is almost a full year earlier than under the current law. Other employees will gain protection once they reach six months’ service; for example, someone who starts work on 1 November 2026 will qualify for protection from unfair dismissal on 1 May 2027—International Workers’ Day—which is 20 months earlier than under the current law. This approach was taken in 1999, when the qualifying period was reduced from two years to one. This approach will prevent a two-tier system, in which some people would remain on a two-year qualifying period while newly hired employees were subject to a six-month qualifying period”.

Guaranteed hours offers for zero/low hours workers

‘Guaranteed hours offers’ for zero / low hours workers has been one of the sticking points between the Commons and the Lords up to now – the government insisting that it is to be an obligation on employers to provide such an offer to qualifying workers versus the Lords position that it should be a right for such workers to request such an offer. Following some amendments, the Lords have now agreed with the government’s position.

For many businesses that employ zero hours/low hours workers, this will be an unwelcome development as it will be more onerous than the version proposed by the Lords. Of some comfort to businesses, the government did say in the House of Lords that they “…agree that future arrangements must not place excessive burdens on employers. We will do this by working with businesses and other stakeholders on the detail of the zero-hours measures, which will be set out in future regulations”. 

The cap on the unfair dismissal compensatory award 

The government’s announcement that it planned to lift the cap on unfair dismissal compensation was one that took everyone by surprise when it was first announced a short time ago. Due to how the unfair dismissal compensation cap works it also caused some confusion about what was meant by lifting it – it’s now clear that the government is proposing to remove it entirely so that unfair dismissal compensatory awards will be uncapped. 

The Lords voted by a narrow margin to reject the removal of the cap on compensatory awards for unfair dismissal instead preferring a requirement for the government to conduct a review of the issue. Much concern was expressed at the late stage at which this new proposal was introduced and that it was done without warning.

The Bill will now head back to the commons where MPs must decide whether to insist on the unfair dismissal compensation cap being removed or agree to carry out a review. 

We will keep you up to date on further developments in relation to the ERB. In the meantime, if you have a HR issue you would like assistance with, please don’t hesitate to get in touch.