The Employment Rights Bill has completed its legislative passage and awaits Royal Assent. While the core principles remain, the final text reflects a year of intense debate, resulting in significant amendments.

A comprehensive analysis of the final Employment Rights Bill.

Key Changes at a Glance:

• Unfair Dismissal Rights – Day One rights dropped. A 6-month qualifying period will apply, January 1st 2027
• Compensation Cap – Removed. Unfair dismissal compensation will be uncapped, January 1st 2027
• Collective Redundancy – Mixed. “One establishment” test reinstated but with a new aggregate threshold. Protective award doubled. April 2026 (Award increase)
• Fire & Rehire – Softened. Automatic unfairness limited to “core terms” (pay, hours, etc), October 2026
• Guaranteed Hours – Complex. Duty to offer guaranteed hours remains; scope extended to agency workers, 2027

Detailed Analysis

1. Unfair Dismissal: A Tale of Two Changes

The U-Turn on Qualifying Periods

In a significant concession to business lobbying, the government abandoned its pledge for “Day One” unfair dismissal protection.

• The New Rule: A six-month qualifying period will be required (expected to apply to those employed on/after January 1st, 2027).
• Probation: While this allows businesses to retain probationary periods, internal processes must be tightened to ensure termination decisions are executed before the six-month mark.
• Stability: The Bill removes the power to change this period via simple order, meaning future changes will require primary legislation.
• Note: Other rights, such as SSP, paternity leave, and unpaid parental leave, will become Day One rights.

The Removal of the Compensation Cap

In a surprise move, the government traded the qualifying period for the removal of the financial cap on unfair dismissal claims.

• Current State: Capped at the lower of 52 weeks’ pay or ~£118,223.
• Future State: Unlimited compensation.
• Impact: This dramatically alters the risk profile for dismissing high earners. It upends the long-standing HR assumption that “discrimination claims are risky, unfair dismissal is manageable.” Settlement negotiations for senior staff will likely become much more expensive.

2. Redundancy & Restructuring

Collective Consultation Thresholds

• The Test: The government reinstated the “at one establishment” test but added a secondary threshold likely based on the total workforce (e.g., 10% of employees across the whole entity).
• The Penalty: The maximum protective award for failing to consult has doubled from 90 to 180 days’ pay. This makes buying out consultation rights prohibitively expensive and significantly raises the stakes for procedural errors.

Fire and Rehire (Dismissal & Re-engagement)

The ban on this practice has been watered down compared to earlier drafts.

• Scope: Dismissal and re-engagement is automatically unfair only if used to change specific “core terms” (pay, hours, pension, shift patterns).
• Fire & Replace: The ban extends to replacing employees with contractors or agency workers (closing the “P&O Ferries” loophole).
• Exception: Employers facing extreme financial distress (insolvency risk) may still use the practice, subject to a Code of Practice.

3. Guaranteed Hours & Agency Workers

The provisions regarding zero-hours contracts remain highly complex, with technical amendments adding to the administrative burden.

• The Duty: Employers must offer guaranteed hours to workers who regularly exceed their contracted hours over a reference period.
• Agency Workers: A major amendment extended this right to agency workers to prevent employers from using agencies to evade the rules.
• Exceptions: Regulations will define “exceptional circumstances” where the duty to offer hours may not apply, intended to prevent significant adverse effects on business.
• Shift Notice: Workers gain the right to “reasonable notice” of shifts and cancellations.

If you need HR support navigating these significant legislative changes, please contact our team at Tick HR Solutions today. Call 01522 448 181