Employment Law Update November 2025

Yesterday, 27 November 2025, the Government announced that it is abandoning its plans to make unfair dismissal a day 1 employment right.

What we know:

• The new qualifying period for unfair dismissal will be 6 months, rather than the current 2 years.

• Surprisingly, the cap on compensation for unfair dismissal claims (which is currently £118,223) will be lifted.

• The change is being made via primary legislation, meaning that another Act of Parliament would be needed if a future Government wanted to change the qualifying period further – making reversing this at a later date much harder.

What we don’t know:

• The press release states that the cap on compensation will be lifted – but we don’t know whether this means “increased” or “removed”. This is an entirely new development. Currently only claims such as whistleblowing and discrimination have potentially uncapped compensation, whereas ordinary unfair dismissal claims have compensation capped at the lower of 52 weeks' salary or £118,223.

• Exactly when these changes will take effect. We believe it will be 2027, but it could be as early as October 2026.

Why this is happening:

The draft Employment Rights Bill has been yo-yoing between the House of Commons and House of Lords for some time, primarily due to disagreement on the right qualifying period for unfair dismissal. The Government has been under increasing pressure to find a compromise between businesses and Unions, and this is it - designed to ensure that the Employment Rights Bill becomes law as soon as possible.

Further information

The full press release can be found here.

We will keep you updated on further developments on this and other areas via this newsletter. Please get in touch if you have any questions in the meantime.