Day one rights scrapped and compensation cap lifted for unfair dismissal

Employment Rights Bill update: Day one unfair dismissal rights scrapped

It was announced yesterday (27 November 2025) in a government press release that, as a result of conversations held between the Government, trade unions and business representatives, the proposal to introduce a day one right against unfair dismissal will be scrapped.

Instead, the qualifying period for unfair dismissal claims will be reduced from two years to six months. Whilst this may result in an uptick in tribunal claims, it is likely to be more manageable for employers than having day one unfair dismissal rights.

Employees will still be able to submit claims of discrimination and automatic unfair dismissal with no qualifying period of service.

The compromise was reportedly reached in order to avoid significant delays to the timetable for delivering the Employment Rights Bill. The Government are committed to delivering “day one rights to sick pay and paternity leave” from April 2026.  

We are awaiting an official announcement as to whether the proposals for a lighter touch dismissal process, applicable during an “initial period of employment” (also known as the statutory probation period), will also be removed. This seems likely.

The Government press release also states that “the compensation cap will be lifted”. Currently, for the vast majority of unfair dismissal cases, compensation is subjected to a statutory cap of the lower of £118,223 or 52 weeks' pay.

It is unclear at this stage whether the cap will be raised, or removed altogether.

Labour agreeing to the six month qualifying period for unfair dismissal claims (which has been insisted upon by the House of Lords), may help to resolve the legislative deadlock. Whilst there are still some areas of disagreement, it now seems possible that the Employment Rights Bill could receive Royal Assent by Christmas.