Employment Rights Bill

The Government's pledge to introduce “day one” employment protections was central to its election manifesto. However, following talks with unions and business groups, the Government has compromised and agreed to reduce the qualifying period for unfair dismissal protection from two years to six months (with the six month period taking ‘immediate effect’ from 1 January 2027 – i.e. any employee that commences employment on or after 30 June 2026 will have sufficient protection by 1 January 2027).

This is a notable shift in position. Employment tribunals (and ACAS) are already under immense pressure, with significant waiting times already in place for hearings to be listed and cases to be determined.

The Government’s decision to move to a six-month qualifying period seems like a sensible compromise to address the above concerns, although it still remains to be seen how ACAS and the Employment Tribunal will cope with increased claims.

Currently, the compensatory award for unfair dismissal is capped at the lower of 52 weeks’ pay or an amount set by the Government (this year, it is £118,223). However, in another significant and unexpected step, the Government has tabled a proposal to remove the compensatory cap for unfair dismissal, bringing claims for unfair dismissal in line with those for discrimination and whistleblowing.

As of 10 December 2025, the proposal to remove the compensatory cap was narrowly rejected by the House of Lords. The Lords noted that sufficient consultation with relevant organisations (including those that represent businesses) had not been undertaken and the impact of this significant change would need further assessment.

The removal of the compensatory cap is likely to have a significant impact across all industries. Whilst the Government has suggested that it may reduce the number of complex, and in some cases, spurious employment claims in the Tribunal (as employees will no longer have to link allegations of discrimination and whistleblowing to unfair dismissal claims to receive high levels of compensation), it represents a significant change in the law. Many consensual exits of employees are dealt with by reference to the maximum sum that an employee could claim for ordinary unfair dismissal. The removal of the cap will likely lead to increased litigation where consensual exits cannot be agreed due to unrealistic expectations of compensatory awards.

The Government’s proposal to remove the compensatory cap on unfair dismissal awards could have a sizeable impact on sport, and in particular, football.

All Premier League / English Football League players (and, a large number of PL/EFL managers) are employed on fixed-term contracts. The expiry of a fixed term contract constitutes a dismissal in employment law. The standard form PL / EFL Contract provides for an additional payment of one month’s pay (subject to a maximum cap of double the unfair dismissal compensatory cap) if the player’s contract is not renewed on terms at least as favourable as those applicable over the final year of his contract. In exchange, the player agrees not to pursue a claim for unfair dismissal in the Employment Tribunal.

Whilst the agreement not to pursue a claim for unfair dismissal is not an effective ‘waiver’ of statutory employment claims (as it does not meet the requirements of The Employment Rights Act 1996) the payment mechanism in the PL / EFL Contract often deters players from commencing any claim in the Employment Tribunal given the compensatory cap on unfair dismissal awards. The proposed removal of the cap likely undermines the purpose and effect of the severance clause in the PL / EFL Contract and could open a potential new avenue to players looking to pursue employment claims in circumstances where they are not offered a new contract on terms at least as favourable as those applicable over the final year of their contract.

Claims in the Employment Tribunal for unfair dismissal could also become more appealing across sport, including for football managers, where disputes would normally be resolved through confidential arbitration. By way of reference and example, any dispute arising between a Premier League football manager and their employer club in respect of their contract of employment is to be determined by the Managers’ Arbitration Tribunal. However, any agreement to arbitrate such a claim cannot prevent an individual from pursuing their statutory employment rights in the Employment Tribunal. With relatively high salaries involved, pursuing claims in the Employment Tribunal for football managers was often seen as hugely unattractive and not worthwhile. That position could change, particularly given the standard position that Employment Tribunal proceedings are public.