Employment Rights Bill

Commons Reason

Motion A

That this House do not insist on its Amendments 120N and 120P to 120S, to which the Commons have disagreed for their Reason 120T.

120T: Because it is appropriate to remove the limit on compensatory awards imposed by section 124 of the Employment Rights Act 1996.

My Lords, in moving this Motion, I will also speak to Motion A1. Throughout the passage of this Bill, which arrived in your Lordships’ House nine months ago yesterday, we have scrutinised, deliberated and debated all areas. Once again, I thank noble Lords for fulfilling their scrutiny role and, in the course of doing so, providing their invaluable insight.

However, we are now in round 4 of ping-pong on a Bill that the Government have a clear electoral mandate to deliver. We cannot be accused of attempting to push the Bill through without listening to the concerns raised by noble Lords. We are immensely grateful for the more than 60 occasions on which noble Lords have engaged with us, offering rigorous scrutiny and thoughtful challenge. It is because of this valuable feedback that the Government have been able to act and make changes where appropriate, including through technical amendments in Committee and on Report and the publication of an implementation road map outlining what the Government will consult on, when, and at what point new rights are expected to go live.

The Government are pleased to have found commonality in the three previous rounds of ping-pong on 11 of the 12 issues the House asked the Government to look at again. The contributions of noble Lords from across the House have helped bring forward solutions on a range of specific issues, from heritage railways to paid time off for special constables. On a number of other issues, such as the right to be accompanied, the Government have made non-legislative commitments which noble Lords have recognised as important progress. Most recently, during ping-pong, the Government brought forward amendments to the Bill on zero-hours contracts, seasonal work, trade union ballot thresholds and trade union political funds, which will help to ensure that stakeholders’ views and insights are represented in the final policy outcomes as we shift into the implementation phase for this Bill.

The Commons amendments in lieu returned to us for further consideration today, after being debated and scrutinised in both Houses last week, directly deliver the agreement reached between business representatives and trade unions. They will reduce the qualifying period for unfair dismissal protections from 24 months to six months, ensure that the qualifying period can be varied only by primary legislation, and remove the compensation cap for unfair dismissal claims. This will remove both the 52 weeks’ gross pay and the £118,223 cap. We have heard the House’s concerns around the compensatory cap, and it is important to reiterate what was said in the last debate: in practice, few awards get anywhere close to these caps, with a median average award for unfair dismissal being £6,746 in 2023-24. Employment tribunals will also continue to assess compensation based on evidence of specific losses when determining awards. Furthermore, as I mentioned in your Lordships’ House last week, the Government stand ready to continue working with businesses and other stakeholders as we implement this change. I was pleased to see this sentiment reciprocated in the letter to the Secretary of State from business representatives.

I reiterate the commitments I made from the Dispatch Box last week. The Government will publish an enactment impact assessment as soon as the Bill achieves Royal Assent and before commencement regulations on the unfair dismissal package are brought to Parliament. This assessment will be public and will include an assessment of the impact of removing the compensation cap. We will also convene meetings early in the new year so that stakeholders can share their views on the impact of this measure. Based on the outcomes of these discussions, I can confirm that the Government will consider what additional dedicated support or guidance might be appropriate as we implement these measures.

The unfair dismissal package should also be seen in the context of wider work to improve the employment dispute system, particularly through the new dispute resolution taskforce set up jointly by my department and the Ministry of Justice. The taskforce will take into consideration the Government’s enactment impact assessment, which will be published on Royal Assent and will include an assessment of the impact of removing the cap. It will also examine the stakeholder perspectives of the impact of removing the cap. The taskforce’s expertise—business, trade unions and other experts—will help support the Government to develop reform measures that promote the prevention and resolution of workplace disputes, as we develop policy to ensure that the current system, including ACAS and employment tribunals, is more efficient and resilient, and that the system works better for both workers and business.

I repeat that the Government’s amendments adhere to the negotiated outcome between trade unions and business representative organisations, and celebrate a successful tripartite agreement. The noble Lord, Lord Sharpe of Epsom, will I am sure disagree with my characterisation of the agreement when he moves his Motion. I am grateful to him and the noble Lord, Lord Hunt of Wirral, for our further engagement earlier today. I once again draw his attention to the assurances given in another place by my ministerial colleague Kate Dearden. The Government want to continue using the tripartite model going forward, as the positive contributions from business representative organisations and trade unions helped to create a practical, proportional and workable agreement. If we do not stick to the principles of this agreement, we cannot in good faith expect these groups to take part in future discussions.

In conclusion, the Government have listened to the concerns of your Lordships’ House. We have worked collaboratively, throughout the passage of the Bill, with parliamentarians, employers and trade unions. We have found compromise on the unfair dismissal provisions and we have now delivered on that compromise as part of a package deal to get this Bill to Royal Assent. Last week, your Lordships’ House asked the elected House to think again. That is the right of noble Lords and, in spite of being a new Member, I respect and defend it. MPs have now done as asked, supporting the Government in delivering the tripartite deal in its totality.

The letter from business representatives also states that

“now is the time for Parliament to pass the Bill”.

Further attempts to unpick the agreement at this, the fourth, round of ping-pong would add to uncertainty, having a material impact on employers and workers alike.

I believe that this is a good agreement. It has involved compromise from all parties, including genuine movement from the Government. I therefore respectfully ask your Lordships’ House to do as business groups have asked: allow this important Bill, a manifesto commitment, to pass and progress on to the statute book. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

At end insert “, and do propose Amendment 120U as an amendment to Commons Amendment 120G, in lieu of Amendment 120N, and Amendments 120V to 120Y as amendments to Commons Amendment 120H, in lieu of Amendments 120P to 120S—

120U: Leave out subsection (3) and insert— “(3) In section 124 (limit of compensatory award etc.), for subsection (1ZA) substitute— “(1ZA) The amount specified in this subsection is £118,223. (1ZB) Within three months of the day on which the Employment Rights Act 2025 is passed, the Secretary of State must conduct an impact assessment of the change to the limit specified in subsection (1ZA) made by that Act in order to assess whether the limit specified in subsection (1ZA) is the appropriate amount. (1ZC) An impact assessment under subsection (1ZB) must consider the effect of the change to that limit on— (a) the ability of claimants to obtain fair compensation, (b) the operation and capacity of employment tribunals, (c) the willingness of parties to settle claims without recourse to a tribunal, and (d) public sector employers and public expenditure. (1ZD) An impact assessment under subsection (1ZB) must include a consultation with— (a) employers’ organisations, (b) trade unions, (c) organisations representing employment law practitioners, and (d) such other persons as the Secretary of State considers appropriate.””