EmpLaw Newsletter Dec 2025

Government drops ‘day one’ unfair dismissal pledge

The Government has confirmed that it is abandoning its original plan to make unfair dismissal a day-one right. Instead, ministers now intend to reduce the qualifying period from two years to six months—a major policy shift designed to break parliamentary deadlock and keep the Employment Rights Bill on track for Royal Assent.

What was originally proposed?

Ahead of the 2024 general election, Labour committed to introducing day-one unfair dismissal rights. This proposal appeared in the draft Employment Rights Bill published in October 2024, alongside a suggested ‘initial period of employment’—expected to last nine months—during which a lighter-touch process could be used for dismissals (other than redundancy).

Why the change?

The House of Lords repeatedly rejected the day-one provisions. To avoid further delay, the Government has now adopted a compromise: a six-month qualifying period. It has also announced that the qualifying period will no longer be alterable via statutory instrument. Any future change will instead require primary legislation, meaning the six-month threshold is likely to remain in place for the foreseeable future.

The compensation cap question

In an unexpected development, the Government also stated that “the compensation cap will be lifted”. Although details are scarce, it appears unlikely that unfair dismissal compensation will become entirely uncapped. A more realistic outcome is the removal of the 52-week pay cap while retaining the existing upper monetary limit (£118,223). If this is correct, lower-paid employees stand to gain most in potential awards.

What does this mean for HR?

While nothing will change immediately - current timelines still point to implementation in 2027 - HR teams should start preparing for the new regime:

• Review probation processes. A six-month qualifying period means decisions on performance, conduct and fit must be made early. Policies should be refined so managers are prompted to act well before the six-month point.
• Build in timing safeguards. Allow flexibility in review schedules to avoid eligibility being reached due to rearranged meetings or delays.
• Consider the ‘statutory week’. A dismissal without notice adds one statutory week to service; an intended pre-six-month dismissal could unintentionally cross the threshold.
• Prepare for higher-value claims. If the 52-week cap goes, tribunals may award significantly more to lower earners. Early evidence around mitigation will be essential.

The shift away from day-one rights offers employers breathing space - but the move to a six-month threshold still represents a substantial change requiring early planning.

Government announces minimum wage rises for 2026

The government has announced the following increases to the national minimum wage rates, to take effect on 1^st April 2026.

• 21 and over - from £12.21 to £12.71ph
• 18-20 - from £10 to £10.85ph
• 16-17 and apprentices - from £7.55 to £8ph

These increases will require HR teams to review pay structures and budgets, particularly where rises may create pressure on differentials and compression between pay bands.

HR and payroll systems need to be ready to react - companies that undergo a compliance check from HMRC can be named and shamed on a published list if they are found to have breached. The list shows the number of employees affected as well as the total underpayment found by HMRC. These underpayments can also be accompanied by a fine for 200% of their value.

Acas Early Conciliation Period extended from six to twelve weeks

From 1^st December 2025, the Acas Early Conciliation period has been extended from six weeks to twelve. What is early conciliation? What has prompted the extension of the period and what will it mean in practice?

What is early conciliation?

Early conciliation via Acas is a dispute resolution mechanism used in employment disputes. It gives both sides a chance to resolve matters before a claim is issued. There is a requirement to undertake early conciliation before issuing almost any employment tribunal claim, including discrimination, whistleblowing, unfair dismissal and unlawful deductions from wages.

Although contacting Acas is mandatory, engagement with the process is voluntary for both employers and employees. If an employee is interested in conciliation, Acas will contact the employer to see if they are willing to take part. If they are, then the parties can use the conciliation period to reach an agreement without prejudicing time limits in the tribunal. It is this conciliation period which has changed – doubling from six weeks to twelve weeks.

What is the impact of the extension of the conciliation period?

If you notify Acas on or after 1 December, the conciliation period will be up to 12 weeks.

The drive behind this change is clear: the early conciliation system is currently overstretched, with reports of conciliators not having the capacity to contact the parties to conciliate at all during the current six-week window. An extension of the conciliation period gives more time for discussions to be held and for settlement to be reached before a claim needs to be issued. This will have the knock-on effect of reducing the number of issued claims, giving the equally overstretched tribunal system welcome breathing space.

The change could be good for employers: allowing more time for disputes to be resolved amicably and without the need to resort to the tribunal – where positions tend to become entrenched and costs quickly mount up. However, there is another angle: this change, especially when combined with the Employment Rights Bill’s proposal to extend the time limit for bringing tribunal proceedings for six months, could mean that some claims are not issued in the tribunal until nine months after the relevant events crystallised. Given the recall issues which can arise with the passage of time, it is important that HR teams gather evidence and recollections at an early stage and do not wait for the extended early conciliation period to expire, or for a claim to land.

How to handle retirement discussions: Top tips for HR

Talking about retirement with employees can feel like a legal and practical minefield – and with good reason. Handled poorly, these discussions can lead to broken trust, constructive dismissal and age discrimination claims.

Start with care – and avoid assumptions

The Acas guidance is clear: don’t raise retirement unless the employee does first. This was highlighted in Tapping v Ministry of Defence, where HR asked a civil servant in his 60s about his retirement plans after he raised a grievance about how his health condition was being managed. The tribunal found that this amounted to unjustifiable direct age discrimination, as a younger employee wouldn’t have been asked the same question.

Top tip: Instead of asking older employees about retirement, ask all employees – of all ages – about their short-, medium- and long-term career plans in regular check-ins or appraisals. This avoids singling anyone out and keeps conversations inclusive and legally safe.

What to cover if retirement is raised

If the employee raises the topic, it's fine to explore their plans. You might discuss:

• Current performance
• Training or support needs
• Career goals and timescales
• Organisational plans and role development
• Options like phased retirement or flexible working

Stay open and non-committal unless and until formal notice is given – people’s plans change, and assumptions can lead to risk.

Think before offering a retirement payment

Where retirement is raised, some employers consider offering an ex gratia payment as a gesture of goodwill. But be cautious: ex gratia payments are not always tax-free just because they’re linked to someone leaving. Any lump sum (including an ex gratia payment) paid to an individual who retires or is nearing retirement on termination is potentially taxable under s393 and 394 ITEPA and, therefore, would not benefit from the £30,000 exemption. Under these sections, any ‘relevant benefits’ (including sums paid on, after or in anticipation of retirement) received by an individual under an employer-financed retirement benefits scheme, count as employment income. The word ‘scheme’ has a wide meaning. In Forsyth v HMRC, the First-tier Tax Tribunal confirmed that a compromise agreement (as settlement agreements were then known) could be a ‘scheme’.

If you’re considering a payment on exit, take tax advice and remember, there’s no legal requirement to make a retirement payment at all.

Non-competition provisions in employment contracts: key challenges to enforceability

Restrictive covenants are provisions in a contract which restrict the behaviour of the parties even once the contract has come to an end. In an employment context, restrictive covenants can be used to limit an employee’s freedom to work for a competitor, or to solicit or deal with customers for a period of time after they have left work.

Restrictive covenants operate as a restraint of trade – limiting what an employee can do on the open market. For this reason, they will only be enforceable if they go no further than is reasonably necessary to protect an employer’s legitimate business interests. Non-competition provisions – clauses which stop an employee from working for a competitor for a period of time – are the most restrictive form of covenant and, for this reason, need to be very tightly drafted and tailored to avoid being found to be unenforceable.

In the recent case of Tom James UK v Max Potter, a Court ruled that a non-compete clause in an employment contract was unenforceable. Mr Potter was a personal tailor. Tom James UK Ltd is part of one of the world’s largest tailoring companies. Mr Potter worked for Tom James for a number of years. He resigned from his role in May 2025. However, when Tom James sought to enforce the 12 month non-compete clause in his contract of employment, the Court held that it was unenforceable. It was found to be too wide. Relevant factors included: 

• A 12-month period of restraint was too long – others can go to work for competitors within six months without the business suffering any harm
• The restriction was not geographically limited – preventing the employee from being a tailor anywhere in the world
• The clause was in all contracts – there was no consideration of its specific suitability and applicability to Mr Potter
• The clause was too wide – it didn’t just prevent Mr Potter from working for a competitor as a tailor, it prevented him from doing any job for a competitor

Employers are reminded that the inclusion of post-termination restrictions in the contract of employment should be considered on a case-by-case basis. A ‘one size fits all’ approach should not be adopted. Restrictions must be drafted as tightly as possible and clearly focused on the business interest which the employer is aiming to protect.

Why employers need to make sure that employees take a break from the workplace

All workers in the UK have the right to take paid holiday. This right is set out in the Working Time Regulations 1998. It is important that workers take time away from work to rest. It is a false economy to have employees who are exhausted – a lack of true rest can have an impact on health, wellbeing, performance and attendance.

Under the Regulations, all workers are entitled to take 5.6 weeks away from work on a paid basis each year. Crucially, it is not enough for employers to just signpost this right and then leave employees to get on with it. Under the Regulations, employers have a positive obligation to encourage employees to take holiday.  

Regulation 13 says employers must: 

1. recognise a worker’s right to annual leave.
2. give the worker a reasonable opportunity to take the leave they’re entitled to or encourage them to do so.
3. inform the worker that any leave not taken by the end of the leave year, which cannot be carried forward, will be lost.

If the employer fails in the above, Regulation 13(17) provides that any annual leave accrued and not taken, or taken but not paid for, must be carried forward to the next annual leave year. 

Practically speaking, employers can take the following steps to help to meet these obligations:

• Have a written holiday policy in place which makes this position clear and is easy to understand.
• Make booking and taking holiday as easy as possible. Use automated forms. Avoid complex systems of approval.
• Make sure that support is available so that workers are not discouraged from taking time off owing to workload issues.
• Review the holiday year structure, and schedule reminders to workers to be sent at certain points in the year to remind them of the amount of leave which is still available for them to take.
• Towards the end of the holiday year, send a communication out reminding employees to book their holidays to the end of the year and reminding them that any leave not taken by then will be lost.
• Inform line managers of these rules so that they do not refuse leave and end up in a situation where the worker is unable to take it before year-end.

Court of Appeal rules that employees can claim against employer and co-workers for ‘detriment of dismissal’ in whistleblowing claims

The Employment Rights Act 1996 includes two different claims which whistleblowers can bring relating to their employment:

• Automatic unfair dismissal under s103A where the reason or principal reason for dismissal is whistleblowing.
• Detriment under s47B where an employee is subjected to detrimental treatment which is materially influenced by whistleblowing.

Unfair dismissal claims can be brought against the employer only. Detriment claims can be brought against the employer and/or against workers or agents of the employer (with a claim against the employer for vicarious liability for the acts of those workers or agents). There is a lower causation test for detriment: the employee only needs to show that the person causing the detriment was materially influenced by whistleblowing. There is also the possibility of claiming injury to feelings (which is not available for unfair dismissal claims).

So, what happens where an employee is unfairly dismissed, claims automatic unfair dismissal against their employer (s103A), but also claims that the act of dismissal by a worker or agent of the employer is a detriment, and claims against the employer for that too (s47B)? On the face of it, it would appear that the legislation itself bars this: s47B(2) states that there can be no detriment claim where the person is an employee and the detriment relied upon is dismissal (presumably because this situation is already protected under s103A).

However, this question was looked at recently by the Court of Appeal in the joined appeals in Wicked Vision v Rice and Barton Turns v Treadwell. The Court of Appeal was asked to decide whether employees could amend their unfair dismissal claims under s.103A to include whistleblowing detriment claims under s.47B, where the detriment complained of was the dismissal.

The Court of Appeal held that an employee can bring a whistleblowing detriment claim under s47B based on their dismissal, where the dismissal is treated as an act of a co-worker and the employer is vicariously liable under section 47B(1B), despite the apparent bar in section 47B(2).

The Court noted that it would have interpreted s.47B(2) as preventing all detriment claims that in substance amounted to a dismissal by the employer. However, it was bound by the earlier Court of Appeal decision in Timis v Osipov, which held that s.47B(2) does not bar a detriment claim against a co-worker responsible for dismissal, nor the vicarious liability of the employer for that co-worker’s act under s.47B(1B). Therefore, even where the detriment alleged is the dismissal itself, the claim can proceed under s.47B(1A) and (1B).

The Court acknowledged that the statutory construction has produced inconsistency across courts, and that a definitive resolution would require either a Supreme Court ruling or legislative amendment. Nonetheless, it concluded it was bound by Osipov, and both employees could proceed with detriment claims based on dismissal.

A ‘timely’ reminder that misconduct should be investigated without delay

The Acas Code of Practice on disciplinary and grievance procedures makes it clear that investigations into misconduct should proceed ‘without delay’. Delay in the process can have a direct impact on the fairness of the outcome.

This point was illustrated recently in the case of O’Brien v Cheshire and Wirral Partnership NHS Foundation Trust. Ms O’Brien was employed as a ward manager by the Trust. She was dismissed for misconduct in March 2021, after allegations that she had failed to work contracted hours and falsely claimed overtime between September and December 2018. However, these concerns were not formally raised with her until October 2019. During this time, she suffered serious ill health, resulting in PTSD and ongoing memory issues. She claimed unfair dismissal and disability discrimination. The employment tribunal initially dismissed her claims, but the Employment Appeal Tribunal allowed her appeal as the tribunal had:

• failed to consider whether the procedural delay - especially the lack of any early conversation with her before March 2019 - rendered the dismissal unfair. The tribunal had accepted that the Trust’s delay significantly affected Ms O’Brien’s ability to respond to the allegations, but it did not properly reflect this in its overall fairness assessment.
• failed to address the correct complaint on reasonable adjustments - namely, that the Trust did not engage with Ms O’Brien informally at an early stage as her disabilities required. The EAT confirmed that any failure to act occurred by March 2019 at the latest. It directed the tribunal to reconsider whether to extend time for this complaint on just and equitable grounds.

HR teams need to be aware that a delay in raising misconduct allegations with an employee may render a dismissal unfair if it prevents them from properly defending themselves, particularly where the delay impacts the employee’s mental health and memory. The goal for HR teams should always be to investigate, and obtain the employee’s view, as soon as issues come to light. The fact that a matter is being investigated does not mean that the employer is committing to take the matter forward to a disciplinary – it is a neutral fact-finding process. The best way to obtain the best evidence is to obtain it when it is fresh in the mind of the employee (and any other witnesses).

Hindsight’s a wonderful thing: why employers can’t retrospectively change their reason for dismissal

It is important for employers, when dismissing an employee, to take the time to understand the wider context of their decision. Once a decision has been taken, the consequences of that decision will flow. It is not possible to ‘row back’ and have a second chance to get it right.

This was illustrated recently in the case of Yoosefinejad v East Space. The employee had a contract of employment which entitled him to receive eight weeks’ notice of dismissal. The contract also included a probationary period clause, but the clause did not provide for a shorter notice period. He was dismissed just before the end of his probationary period. His employer paid him only 12 days’ notice pay. The employee claimed wrongful dismissal.

The employer, having realised that the probationary period clause didn’t allow it to dismiss on short notice, changed tack and argued that they should have dismissed the employee for gross misconduct (with no notice) – giving examples of his poor conduct prior to being dismissed. The Employment Appeal Tribunal gave this argument short shrift – there was no evidence, even if the employee’s actions were a fundamental breach of contract, that the employer had unambiguously accepted the breach – at best the evidence demonstrated that the employer felt that, with hindsight, it should have dismissed the employee for gross misconduct. 

This case carries the following learning points for HR:

• Review probationary period clauses to check that they include a right to pay short notice for probationary dismissals.
• If full contractual notice is due under the contract but the employer does not think that it should be paid then, rather than paying a lower amount and ‘hoping for the best’, it is better to tackle the issue head-on: could the employee be summarily dismissed for gross misconduct?; is there any scope for bargaining with the employee and agreeing a reduced notice period in the circumstances?

• Train managers so that they understand the contractual framework they are working within – the issues in this case could have been avoided if the person who dismissed Mr Yoosefinejad have been aware of his contractual entitlements before he chose to act.

And finally ..

Employers are being warned to watch out for a new species hopping through the workplace: the ‘office frog’. The term has been coined to describe younger employees -particularly those of Gen Z - who move frequently from one job to another, leaping from role to role as a frog might from lily pad to lily pad.

For HR, this new buzz word should ring alarm bells. Onboarding is a costly process. If a business has found the right person for the job, they do not want to lose them. They want to retain talent. So, how can HR make sure that their recruits are not tempted to ‘hop off’ whenever a new opportunity presents itself? Here are some ideas:

• Make sure that your pay and rewards package is competitive. If possible, look at flexible benefits structures so employees can pick and choose the right benefits for them. Gen Z will welcome the freedom and the control that that gives them.
• If retention is an issue, tie performance-related pay to a requirement to remain in the business. For example, you may decide to structure bonus schemes so that an element of bonus is deferred – encouraging the employee to remain in the business to receive their full pay out.
• Gather the views of your workforce – employees are more likely to feel invested in their workplace if they feel like they are playing an active part in shaping it.

These buzzwords don’t come from nowhere – they are a reflection of the mood of the workforce in the UK and should not be ignored.