MPs pass unfair dismissal changes with retrospective start date

MPs have voted in favour of the government's amendments to the Employment Rights Bill, confirming that the new six-month qualifying period for protection against unfair dismissal would come into force with a retrospective start date of 1 January 2027.

As the Bill returned to the House of Commons for consideration of the Lords' amendments in the latest round of "ping-pong", the abolition of unfair dismissal compensatory limits was also confirmed last night, although the Liberal Democrats accused ministers of "sneaking in" the shock change and abstained.

Unfair dismissal commencement date

Angela Rayner, former deputy prime minister and leading architect of the Bill, told MPs she was "frustrated" by the Bill's delays and hoped "Conservative members will no longer frustrate what was a key manifesto pledge for us".

Welcoming last month's six-month compromise on unfair dismissal, Rayner said: "Because of the complexities, the original deadline was October 2027. With the changes, which have been welcomed by trade unions and business, we can now bring that forward, so that, instead of the measures being frustrated, people can have the rights that they absolutely deserve and need."

Kate Dearden, employment rights minister, had already confirmed that the change to the qualifying period for unfair dismissal protections - from the current two years to six months - would apply retrospectively from 1 January 2027.

She said the government would adopt a commencement approach that would extend protections "immediately" from that date to employees who already have six months' service or more.

"Under this proposal, someone employed from today will gain protection against unfair dismissal on 1 January 2027. That is almost a full year earlier than under the current law.

"Other employees will gain protection once they reach six months' service; for example, someone who starts work on 1 November 2026 will qualify for protection from unfair dismissal on 1 May 2027."

She added: "This approach was taken in 1999, when the qualifying period was reduced from two years to one. This approach will prevent a two-tier system, in which some people would remain on a two-year qualifying period while newly hired employees were subject to a six-month qualifying period."

It means anyone hired from 1 July 2026 would gain protection after six months.

Was scrapping the compensatory caps 'snuck in'?

As reported by Personnel Today on Friday, some business groups have shared that the government's amendment to the Bill to scrap the caps on unfair dismissal compensatory awards did not reflect the conversation "in the room" when they met with ministers and unions to find a compromise that would allow the Bill to proceed.

That sentiment was echoed by Sarah Olney, the Liberal Democrats' business spokesperson, who told MPs last night: "We would support the motion were it not for the lifting of the compensation cap being snuck in at the last minute. This last-minute change has not been part of any conversation that we have had with ministers in the other place. That is why we will abstain on the motion."

Antonia Bance, Labour, former TUC head of communications, replied: "The honourable member seems to be under the misapprehension that the lifting of the cap was not agreed as part of the negotiation on the compromise. It was. Perhaps she would like to revise her remarks."

Olney responded: "I will not revise my remarks. We have been speaking to many business groups that were in the room with the minister, and they have told us that it was not part of the agreement."

Asked if she would name them, Olney replied that she would not.

'True reflection'

Dearden returned to the despatch box: "With respect, I was in the room as part of the negotiations with business representatives and trade unions, and I thank them again for the constructive dialogue and leadership that they showed throughout the numerous days of conversation.

"I can confirm that the compensation cap was discussed and agreed in the room, so I ask the Liberal Democrat spokesperson to reflect on her comments. I was in the room; with due respect, she was not. That is a true reflection of what was discussed and agreed."

After an hour of debate, MPs backed the government's amendment on unfair dismissal. Further amendments on the definition of seasonal work, contributions to political funds by trade union members, and turnout thresholds in ballots for industrial action were also backed by significant majorities.

Before the votes took place, former employment rights minister Justin Madders had said: "This has to be the line in the sand. This Bill was introduced more than a year ago, and the delays have been so long - it was in the Lords for nine months - that even our modest statutory sick pay proposals are at risk of being delayed.

"The message to the Lords has to be 'This is enough'. This Bill was a clear manifesto commitment, and it pains me that we have had to jettison part of it to get it over the line."

The Employment Rights Bill returns to the House of Lords tomorrow (10 December) for consideration of the Commons amendments. If it passes - and some commentators believe the quick turnaround between the Commons and the Lords suggests it will do - it could receive Royal Assent before Parliament rises on 18 December.