Update on the Employment Rights Bill and day one unfair dismissal rights

15 December 2025

The Employment Rights bill has been ping-ponging back and forth between the House of Commons and the House of Lords for some considerable time now. The two houses have repeatedly failed to reach an agreement on various amendments in the Bill, including the Labour Party manifesto commitment to grant unfair dismissal rights from the first day of employment.

Remember that certain categories of claim already have day one rights, including whistleblowing protections and discrimination claims, although many claims will be of such a low value in the early days of employment that they are scarcely worth pursuing. Remember also that with unfair dismissal, the dismissed employee is obliged to mitigate their loss by finding new work. A claim for unfair dismissal is a reasonably low-value one unless you have an extensive period of service or you cannot find another job. If you have mitigated your loss and found a new job on similar pay, an unfair dismissal claim is not likely to yield much financial benefit, and care should be taken before embarking on litigation and legal costs.

The Government has agreed to abandon day one unfair dismissal rights after much lobbying by business organisations. This is an embarrassment for the Government, and as a panacea for this, it has been suggested that the cap on compensation for unfair dismissal may be removed, meaning that there is no statutory upper limit to how much a claimant can win for unfair dismissal. This is obviously big news, but it remains to be seen whether it will become a reality. The Bill is due to be debated again this evening, with the hope that the Bill might pass before Christmas.

A press release from the Department of Trade and Business says that the compensation cap will be lifted. This is ambiguous. Does it mean removed or raised? We shall see. Maybe it means that one of the two current caps might be lifted, currently a year’s salary or £118,223, whichever is lower.

We shall soon find out and will report it here.

This blog was written by Anita Vadgama, Partner at didlaw.

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Update on the Employment Rights Bill and day one unfair dismissal rights

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