Following its slightly cryptic announcement on changes to unfair dismissal compensation last week (details here: Unexpected developments on the Employment Rights Bill, Abigail McKean) the government has published its latest amendments to the Employment Rights Bill. These propose that the cap on compensation for unfair dismissal is removed entirely. It will be interesting to see what effect this change (if made) will have on Employment Tribunal claims and on the process of negotiating exits or settlements with employees. 

Compensation for unfair dismissal is based on the claimant’s loss of earnings flowing from the dismissal subject, currently, to a cap of the lower of 52 weeks’ gross actual pay at the time of dismissal or £118,223. According to the latest statistics provided by the Employment Tribunal, though, the average compensation awarded for unfair dismissal was £14,000. For the average claimant this change is therefore unlikely to make much difference. 

Where we would expect to see an impact is in relation to disputes with employees who are senior and/or highly paid, whose negotiating position may be significantly improved by the removal of the cap. We are also likely to see more claims for significant or career ending loss from employees at any income level who find it difficult to obtain alternative employment following a dismissal, and who will particularly benefit from the removal of the 52 week limit.

In other developments, it appears that the proposed amendment to bring forward the changes to the qualifying period for unfair dismissal to next year has been dropped. This change is now expected in (early) 2027.

This being said, never has the phrase ‘It ain’t over till it’s over’ been more true than in relation to the ERB. As we have mentioned previously, the Bill goes back to the Commons on Monday (8 December), and the House of Lords on Wednesday (10 December), so await further developments!