UK law makers have pushed back on government plans to remove the cap on compensation that employees can be awarded when successful with unfair dismissal claims.
Late last month, the government dropped its plans to provide employees in Britain with rights to claim unfair dismissal from ‘day one’ of their employment while proposing to reduce the period that would apply before they qualify for unfair dismissal protections from two years to six months, applicable from January 2027. At the same time, the government announced plans to ‘lift’ the current compensation cap that applies to unfair dismissal claims – a year’s pay or 118,223, whichever is lower”. In fact, the government opted to remove the cap altogether.
The changes in government policy were framed as a compromise to address the respective interests of both business groups and trade unions and followed a meeting the government convened between representatives on both sides. The government subsequently tabled amendments to the Employment Rights Bill with a view to giving effect to the changes and achieve the bill’s passage through the final stages of the parliamentary process.
However, on Wednesday, peers in the House of Lords rejected the government’s proposals on removal of the cap. They voted to approve a motion the effect of which is designed to trigger further debate on whether the government ought to undertake a review of the compensation limits before they are abolished, before the bill is finalised.
The motion...
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