Employment Rights Update: What Employers Need to Know

Recent announcements from the Government have created fresh uncertainty for HR professionals and employers. While some proposals have been scaled back, several points within last week’s press release suggest that the employment landscape will continue to shift over the coming years.

On Thursday, the Government confirmed that the proposed Day One right to claim unfair dismissal—originally a central feature of Labour’s Make Work Pay commitments—has been dropped. After significant pressure from unions and the House of Lords, the position has been revised. The current two-year qualifying period will instead be reduced to six months. Although timings have not been finalised, October 2026 appears likely.

As highlighted by Daniel Barnett and Darren Newman, the press release contained two further points that warrant attention.

1. Primary legislation, not secondary

The Government intends to implement the new qualifying period through primary legislation. This makes future amendments more difficult and signals a firmer long-term commitment to the change.

2. The compensation cap “will be lifted"

”The press release states: “To further strengthen these protections, the Government has committed to ensure that the unfair dismissal qualifying period can only be varied by primary legislation and that the compensation cap will be lifted.”

The wording leaves room for interpretation. Does lifted mean increased, or removed entirely? A higher cap would be notable; the removal of a cap would carry far greater consequences, potentially increasing both the risk and the complexity of dismissal-related claims.

Beyond the above developments, there are four additional areas employers should monitor:

Statutory Sick Pay and Paternity Leave

SSP will become payable from day one of sickness, and the right to Paternity Leave will apply from day one of employment. Both changes are due in April 2026.

Fair Work Agency

The Government has confirmed its intention to create a Fair Work Agency, although the launch date is not yet known. If implemented at scale, it may have significant implications for both oversight and enforcement. Whether funding will allow it to operate effectively remains to be seen.

Longer early conciliation and claim time limits

The ACAS early conciliation period could increase from six to 12 weeks from December 2025. In addition, the Employment Rights Bill proposes extending the tribunal claim time limit from three to six months. Together, these changes may leave employers waiting up to nine months to know whether a claim will be made.

Future pension changes

The Budget outlined a proposal to cap the amount employees can contribute to pensions via salary sacrifice at £2,000 from 2029. This will require precise legislation to distinguish between salary sacrifice arrangements and standard contractual negotiations around pay and pension contributions. Some complex anti-avoidance provisions are likely.

Once again, the well-used phrase “watch this space” feels particularly apt.

FeMan Consulting has supported businesses for nearly 20 years with practical, reliable HR guidance and thorough background screening services. If you would like to discuss any of the above developments or need advice specific to your organisation, please contact Mike Clyne at mike@femanconsulting.co.uk.