Update on Employment Rights Bill – 9 December 2025

The Employment Rights Bill was back in the House of Commons yesterday (Monday 8 December) to consider amendments proposed by the House of Lords and to incorporate changes regarding unfair dismissal rights resulting from recent discussions between government, trade unions, and business representatives. These key amendments address significant points of contention regarding worker protections and trade union operations.

Unfair dismissal: six month qualifying period

The initial government proposal to remove the qualifying period entirely, making unfair dismissal a "day one right," was highly contentious and had been hotly debated between the House of Commons and the House of Lords.

The House of Commons has now agreed to a six-month qualifying period for unfair dismissal. While this is a substantial reduction from the current 24 months, making it likely to result in more tribunal claims, it is expected to be easier to manage than the initial proposal of day-one rights. Interestingly, any future variation to this qualifying period would require primary legislation, thereby making future changes difficult. 

The other critical measure under this heading is the removal of the compensation cap for unfair dismissal claims. Amendments proposed by the House of Commons clarify that the proposal is to remove the compensation cap entirely. This resolves previous ambiguity regarding whether the cap meant eliminating the limit of 52 weeks’ pay or retaining the existing limit of £118,000 (reviewed annually for inflation) for claimants whose losses justified that amount. The removal of the compensation cap would significantly impact employers, particularly in cases that involve substantial pension loss, and the House of Lords’ reaction is highly anticipated. As the Bill will be back in the House of Lords tomorrow (Wednesday 10 December), we should know soon whether this proposed change will take effect.

Guaranteed hours and zero hours contracts

The Government aimed to eradicate what they branded ‘exploitative’ zero hours contracts by requiring employers to proactively offer contracts guaranteeing hours based on the average hours worked after a reference period.

The House of Lords initially sought a provision requiring workers to specifically request guaranteed hours. However, the Lords have not insisted on this, instead proposing amendments that allow a worker to opt out of receiving guaranteed hours offers. The House of Commons has since put forward new wording for the Bill, which mandates that a consultation must take place before regulations regarding guaranteed hours are implemented.

Trade Union reforms remain contentious

Two major areas of trade union reform continue to be points of contention between the two Houses.

Regarding trade union political funds, the House of Commons propose a system where union members contribute unless they opt out. Conversely, the House of Lords prefers an opt-in system, requiring members to explicitly agree to contribute to political funds. The House of Commons has responded by proposing amendments that set out that guidance will be published on this issue.

On ballot thresholds for industrial action, the House of Commons proposed removing the existing requirement for a 50% minimum turnout. The House of Lords continues to argue for the retention of the current 50% turnout threshold, and this remains a contentious point. Further amendments have been put forward by the House of Commons for the Lords to consider tomorrow.

Seasonal work definition

The Lords requested a clear definition of seasonal work, along with obligations for the Secretary of State to consider when creating regulations, particularly concerning guaranteed hours contracts. The Commons view this amendment as unnecessary. While the House of Commons did not agree to include a definition of seasonal work, they have proposed amendments requiring the Secretary of State to consult with relevant persons before making regulations.

The Bill is scheduled to return to the House of Lords tomorrow (10 December).