Yesterday, Thursday 27th November, the Government announced two major changes to the UK Employment Rights Bill. These changes include a concession on the qualifying period for unfair dismissal and an alteration to the compensation cap.
The Labour Government made a U-turn on their manifesto pledge to introduce a day one right to unfair dismissal protection, which will now require 6 months’ continuous employment. The 6-month employment period will be welcomed by employers and the House of Lords, who have been pushing for this change. It will give employers some time to assess new employees and, from an employer perspective, is a more pragmatic approach than the Government’s previous proposal of introducing a statutory probational period and ‘light touch’ process.
The second is that they will be lifting the current compensation cap, which is currently the lower of 52 weeks’ pay or £118,223. However, current indications from commentators, including those who were present when this change was discussed, indicate that only the 52 weeks’ limit will disappear (with the back stop of £118,223 remaining and increasing with RPI). As such, the change will mainly benefit those whose annual income is lower than £118K, with higher earners still being subject to the existing cap.
It appears the Labour Government are making major concessions on day one rights, and are trading this for the compensation cap, in the hope the House of Lords will now agree to the bill becoming law so they can keep to their implementation timetable. Employers will likely be less impressed with the compensation cap changes as employees are likely to seek more compensation in Tribunal claims or in exit packages.
