Government U-turn on day one rights to unfair dismissal and removal of Unfair Dismissal compensation cap

28 November 2025

After reporting on the Employment Rights Bill being stuck in legislative ping pong, it was announced on 27 November that in a huge turn of events that the promise of day one rights to unfair dismissal will be no longer.

The Government has confirmed that the qualifying period for unfair dismissal, rather than being removed completely will be shortened from two years to six months.

According to ministers, this strikes a more practical balance between protecting a much wider range of workers and preserving some degree of certainty for employers.

Importantly to note, future Governments will not be able to change the qualifying period without going back to Parliament as the change will be made through primary legislation rather than by utilising the existing authority in the Employment Rights Act of 1996. This has been portrayed by officials as a means of securing the new framework and making sure it is difficult to undo.

Additionally, the Government has stated that the compensation cap will be lifted for unfair dismissal claims. Unfair dismissal awards could become unlimited in the same manner as discrimination and whistleblower cases if the cap is completely eliminated. Alternatively, the Government might indicate a choice to keep only one of the existing limits, such as keeping the upper monetary limit of £118,223 and removing the one-year salary cap or vice versa. We can only wait for this to be cleared up in time and we will be sure to keep you updated as things develop.

Need clarity on what these changes mean for your organisation? Get in touch with our employment team today.

This article was written by Gabrielle Scriven.