Employment Rights Bill: Bill returns to the Commons once again

The latest update

The Bill has undergone multiple rounds of debate and amendment between the Commons and the Lords. On 5 December 2025, the Commons published an amendment paper addressing the remaining issues in dispute. While most amendments have now been accepted, one key issue remains unresolved: the complete removal of the cap on compensatory awards for unfair dismissal.

Government amendments in focus

The government has made several amendments on previous outstanding issues to facilitate the Bill's progression. The following government amendments have now been agreed:

• Guaranteed hours offers for zero-hours and low-hours workers: The government has committed to carry out consultations before making regulations on key elements of the new duty to offer guaranteed hours contracts. This includes the length and meaning of the initial and subsequent reference periods for both directly engaged workers and agency workers.
• Definition of seasonal work: Although the government did not accept the Lords’ proposal for a statutory definition of seasonal work, it has agreed to consult on the impact of the guaranteed hours duty on seasonal workers and seasonal agency workers before regulations are made.
• Trade unions: Political fund contributions: The government has reaffirmed its commitment to reverse the 2016 opt-in requirement for political funds. The agreed amendment refines the timing and operation of opt-out notices under the restored pre-2016 regime. This issue is now settled.
• Industrial action ballots: Turnout threshold: The government intends to enable electronic balloting for statutory union ballots by April 2026. The agreed amendment requires ministers to consider the impact of electronic balloting on turnout before deciding whether to bring forward regulations that would remove the 50% turnout threshold. The threshold itself is not removed at this stage.

So what issues remain to be agreed between the two Houses?

The only remaining outstanding issue is in respect of the unfair dismissal provisions of the Bill. As has been well-reported, the government's original intention was to introduce day one unfair dismissal rights to take effect from some point in 2027. The House of Lords vehemently opposed day one rights, and had tabled amendments for a six-month qualifying period instead. In a significant policy change, and an attempt to keep the Bill from stalling completely, the government have conceded on this point.

However, as well as accepting a six-month qualifying period, the government have also tabled amendments to repeal the statutory cap on compensatory awards for ordinary unfair dismissal claims.

As a reminder, an unfair dismissal award comprises two elements: a basic award which is calculated in the same way as a statutory redundancy payment; and a compensatory award, which is compensation intended to reflect the "just and equitable" amount required to compensate the unfairly dismissed person for their financial losses. The compensatory award is currently subject to a statutory cap which means that the maximum award will be 52 weeks' gross pay, or £118,223, whichever is the lower. So, for an employee on a salary of £25,000, their compensatory award will be capped at £25,000. Whereas for an employee on a salary of £200,000, their award would be capped at £118,223.

On Wednesday night, the Lords accepted the six-month qualifying period, but by a narrow margin, rejected the removal of the compensatory award cap. The Lords cited concerns at the late-stage introduction of this significant provision, which has been tabled without debate, consultation or an impact assessment. The Lords have instead proposed an amendment requiring the government to conduct a full review of the compensation cap, following consultation.

Next steps

Parliamentary recess begins on 18 December, leaving limited time for further debate. Unconfirmed reports suggest the Bill is expected to return to the Commons early next week, with the Lords to follow shortly after.

We will continue to report on any further developments. 

For more information or advice, please contact Elizabeth McTeigue in our Employment team.