The final point of contention between the Commons and the Lords was whether to lift the statutory ceiling on compensation for ordinary unfair dismissal. That issue has now been resolved, and we have a clearer picture of what the new regime will look like – and when it will apply.
What practical steps should employers be considering now?
What is changing and when?
The key changes in the Act are:
Qualifying period
Ordinary unfair dismissal protection will move from two years' continuous service to six months. From 1 January 2027, employees who have been employed for at least six months will generally be able to bring an ordinary unfair dismissal claim.
Compensation
The Government proposed removing the existing compensatory award cap for ordinary unfair dismissal (the lower of 52 weeks' pay or the statutory maximum), bringing it into line with discrimination and whistleblowing claims in terms of potential financial exposure. The Lords were not keen on this. The compromise reached is that the cap will be lifted but the Government is committed to publishing an impact assessment on removing the cap before implementing the unfair dismissal sections of the new Act.
Future changes for unfair dismissal qualifying period
Any alteration to the new six-month qualifying period will have to be made by primary legislation, rather than by regulations, making it more difficult for future governments to adjust the threshold.
Zero-hours and predictable work patterns
Zero and very low-hours arrangements will be reshaped by a new duty on employers to offer a contract with "guaranteed hours" that reflects hours actually worked over a reference period, with further details (including the length of that period and how "low hours" will be defined) to be set in regulations. Workers will also gain statutory rights to reasonable notice of shifts and proportionate compensation where work is cancelled or curtailed at short notice. These measures are expected to take effect from 2027, after consultation.
Seasonal and temporary roles
Where there is a genuine short-term or seasonal requirement, the guaranteed-hours offer can be framed as a fixed-term contract rather than permanent hours. The scope of what counts as a "temporary work need" will be consulted on before regulations are made, with the aim of protecting seasonal workers while still allowing flexibility in sectors such as agriculture, hospitality, and tourism.
Family leave and bereavement
Paternity leave and parental leave will become day-one rights, and there will be a new statutory right to bereavement leave, alongside enhanced protections for pregnant workers and new mothers. Most of these changes are scheduled for phased implementation in 2026/27.
Industrial action and balloting
A wider package of reforms will unwind much of the 2016 trade union legislation. This includes enabling electronic and non-postal balloting and, in due course, removing the 50% turnout threshold for industrial action ballots, but only once ministers have considered the impact of e-balloting on participation and laid a statement before Parliament explaining their assessment. Related measures enhance protection from dismissal for taking part in lawful industrial action and simplify some ballot and notice requirements.
What are the practical considerations going forward?
In light of the Act, it would be sensible to:
Revisit probation and early performance processes
Ensure probation procedures are robust and carried out consistently to allow for dismissals of unsuitable staff within the initial period of six months' service.
Upgrade performance, conduct and record-keeping practices
Encourage managers to address concerns promptly and to keep concise written records of key conversations, expectations and follow-up actions.
Brief line managers and HR
Provide clear guidance and, where appropriate, training, on the new rules.
Questions?
If you would like help reviewing your contracts, policies, performance management processes or restructuring plans in light of the new six-month qualifying period and uncapped unfair dismissal compensation, we are here to help with clear, practical advice tailored to your organisation.
Get in touch with our Employment team on 01722 412 412 or email Anthony.Edwards@wilsonsllp.com
Employment Rights Act 2025 Roadmap
Below is our Employment Rights Act 2025 Roadmap, which provides a high-level overview of when the key changes are expected to take effect. Clicking on the image will open a larger, printable version for you to share internally.
