This morning the Government has published its latest amendments to the Employment Rights Bill. The paper reflects the changes announced by the Government on 27 November 2025 and gives the detail we have been waiting for.
What the amendments say about unfair dismissal
As expected, the amendments confirm the proposal to reduce the length of service an employee needs to bring an ordinary unfair dismissal claim, from two years to six months. This replaces the Government’s initial plan to make unfair dismissal a day 1 right (which we covered in this blog).
Somewhat unexpectedly, the amendments also provide for the cap on unfair dismissal compensation to be removed completely.
The update published last week said the Government had committed to ensuring “the compensation cap will be lifted”. Many employment lawyers have spent the last week wondering what this means. It’s now clear that “lifted” means removed in its entirety, to allow for uncapped compensation.
Removal of the cap – practical impact
Compensation for ordinary unfair dismissal claims currently consists of a basic award (calculated using a statutory formula, which will remain unchanged) and a compensatory award, capped at the lower of 52 weeks’ gross pay and a monetary cap (currently £118,223).
The Government’s proposal would remove the statutory cap on the compensatory award and bring compensation for unfair dismissal in line with financial compensation for discrimination and whistleblowing, for which there is no upper limit.
Although, for employers, this may seem alarming, we should remember that the objective of the compensatory award is to compensate employees for financial loss because of their dismissal. Employees will still need to provide evidence of that loss and prove it is attributable to the employer’s actions. Employees will still have a duty to mitigate their losses. But in the case of higher earners and where there are career-long losses (including significant pension loss), this could result in substantially higher awards being made. It may also push settlement figures higher.
Combined with the new six-month qualifying period, we expect to see an increase in the number of Tribunal claims being lodged.
Next steps
We expect the proposal to lift the compensation cap to generate debate in both the House of Commons (on 8 December) and the House of Lords (on 10 December). The other outstanding amendments in the Bill will also be considered.
We will need to wait to see whether there will be a consultation on the plan to scrap the cap, before the law changes.
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