Employment Rights Bill

Kate Dearden Excerpts

Consideration of Lords message
Monday 15th December 2025 Commons Chamber

[The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)]

I beg to move,

That this House disagrees with the Lords in their amendment 120N to Commons amendment 120G and their amendments 120P to 120S to Commons amendment 120H.

I am returning for the fourth time to the consideration of Lords amendments to the Employment Rights Bill. The Bill will bring employment rights legislation into the 21st century, extending the protections that many British companies already offer their staff to all. I cannot hide my frustration that, once again, we have been blocked from getting this Bill on to the statute book by the other place.

[Sir Desmond Swayne (New Forest West) (Con)]

Which British company offers unlimited compensation for unfair dismissal? What message does this measure send to companies that can locate well-paid staff anywhere in the world?

[Kate Dearden]

I will allow the right hon. Gentleman to listen to the reflections further on in my speech. I am not sure he entirely grasps the compensation cap proposal and our intentions.

[Angela Rayner (Ashton-under-Lyne) (Lab)]

What message does it send to the British public when 33 hereditary peers defeat the Government by 24 votes on a manifesto promise? Some of the wealthiest are blocking measures on sick pay for some of the lowest earners, which will miss the April deadline. Should we not get on—go through the night if we have to—and get this Bill passed?

[Kate Dearden]

We are absolutely determined to get this legislation through, and I urge colleagues in the other place to pass this Bill for the reasons my right hon. Friend outlines: 1.3 million people will be entitled to statutory sick pay from as soon as April. That is significant, and it is why it is so important to get the legislation on to the statute books.

[Jim Shannon (Strangford) (DUP)]

My colleagues in the other place all expressed concern about open-ended, unlimited compensation. That is a concern not only for them and for colleagues here, but for businesses back home. I know the Minister means well, but for goodness’ sake, this will not work for business.

[Kate Dearden]

If hon. Members allow me to make some progress, I will get to the background and reasoning for the compensation cap.

Continued delay to the Bill will put implementation at risk, which creates insecurity and uncertainty for workers and employers alike. I hope the other place acknowledges the importance of this and will let the Government deliver the Bill, which is backed by an electoral mandate, as my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) said. We have been engaged in ping-pong for far too long, and further delay is in no one’s best interests. I hope the arguments I make today will address the reservations of those Members of the other place who have been engaging in good faith when they have had genuine concerns about the Bill.

As I told the House last week, I convened a series of constructive conversations on the unfair dismissal provisions, which resulted in a workable agreement with trade unions and business representatives and was the subject of Government amendments made last week. I can assure hon. Members, as someone who was in the room during the negotiations, that the agreement between unions and business representatives was made with good will and in good faith by all sides.

As those representatives of the British Chambers of Commerce, the Chartered Institute of Personal and Development, the Recruitment and Employment Confederation, Small Business Britain, the Federation of Small Businesses and the Confederation of British Industry said in today’s letter to the Secretary of State, the “outcome” of the

“dialogue…represented a significant step forward which will have a positive impact on growth and opportunities.”

The amendments tabled in the other place undermine that agreement, as the compensatory award cap would not be removed and instead the Government would conduct and publish a review of the impact of the cap. The removal of the cap would then require further primary legislation.

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

My hon. Friend has set out how sensible the conversations have been thus far, but does she agree with me that they have been totally frustrated by colleagues down the corridor, who have no regard for the mandate that was returned to the Government at the last general election, and that we should stand firm and make sure that these rights are not further impeded by the unelected House?

[Kate Dearden]

That is why our motion today disagrees with the Lords amendments and insists on our amendments from the previous round of ping-pong, which deliver on the agreement made by trade unions and business representative organisations.

[Aphra Brandreth (Chester South and Eddisbury) (Con)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests.

I wonder whether the Minister is comfortable with the fact that introducing an uncapped unfair dismissal compensation award will make the UK an international outlier, when many of our international competitors have clear limits. If she is comfortable with that, what assessment has she made of the impact on UK jobs and inward investment to the UK, particularly in business sectors that are internationally mobile?

[Kate Dearden]

Our proposal would remove the cap of 52 weeks’ gross pay or £118,223. It is important to reflect that, in practice, few awards get anywhere close to the cap. The median average award for unfair dismissal in 2023-24 was £6,746. Employment tribunals will continue to calculate compensatory awards to reflect the losses that employees suffer as a result of being unfairly dismissed.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

Has the Minister conducted an impact assessment? If so, how much does she think this change will cost? How many uncapped awards will be made? These are the kinds of big, important decisions that the other place has concerns about, as do Conservative Members. If she has that evidence, she could put this to bed tonight by simply providing it to us so that we can make an informed decision.

[Kate Dearden]

An economic assessment will be published, as is standard practice.

[Paul Waugh (Rochdale) (Lab/Co-op)]

I am sure that my hon. Friend shares my frustration at the sheer misinformation that has been spread about the removal of the cap on compensation. As she rightly says, the median award at the moment is less than £7,000. More importantly than that, only 2% of all employment tribunals ever result in a compensation award for unfair dismissal. Does she agree that the Government have indeed taken into account the concerns of Cross-Bench peers by committing to an assessment, and more importantly does she agree that those employers and the unions together can see what the Opposition do not, which is that this is will be fair to workers and fair to businesses that are fair to their workers?

[Kate Dearden]

I wholeheartedly agree with my hon. Friend’s comments. We believe that the current compensatory award cap also creates a systemic incentive for unfair dismissal claimants to construct more complex cases, which could take longer for a tribunal to handle. By removing the compensatory award cap for unfair dismissal claims, the incentive may be lessened, potentially making it easier for tribunals to reach a judgment more quickly and decreasing the burdens on the system.

[Tom Tugendhat (Tonbridge) (Con)]

I am not at all surprised that the Minister is having a little bit of a problem with the other place—after all, she is not the first Minister to have been confused as to what was in a manifesto and what was not; the Prime Minister seems to have been confused about the assisted suicide Bill.

May I raise a question about the cap? The problem that many businesses will have is with insurance. Most businesses take some form of insurance for unfair dismissal. Insurance companies work on the basis that they have an understandable level of risk that they are underwriting. If they do not know what that risk is, they will not underwrite it. The challenge here is that by removing the cap, the Minister is changing the level of maximum risk and therefore making it much harder for insurance companies to underwrite it. Has she spoken to insurance companies about the challenges that this poses?

[Kate Dearden]

I listen to the Conservatives again and again as they come to the Chamber—they have done it again today—and talk down what was a clear manifesto commitment of this Bill.

[Antonia Bance (Tipton and Wednesbury) (Lab)]

I am sure the Minister is coming on to this in her speech, but it might be worth reiterating, for the benefit of those on the Opposition Benches, that the best way to avoid having to pay compensation for unfair dismissal is to avoid unfairly dismissing someone in the first place.

[Kate Dearden]

My hon. Friend makes an excellent point, as she always does, and I thank her for it.

To conclude, we are seeking the support of the House so that we can finally secure Royal Assent and move towards implementing our long-overdue reforms to make work pay. Today’s correspondence from business representatives to the Secretary of State states that British business believes that

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

I urge Members across the House to reflect on that comment, on our election mandate from last year and on all the work and consideration that has been put into this Bill so far in both Houses. I thank all colleagues for their work, and I commend this motion to the House.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

--- Later in debate ---

[Madam Deputy Speaker (Caroline Nokes)]

Order. I call the Minister.

[Kate Dearden]

I am grateful to hon. Members across the House for their contributions today and throughout the passage of the Bill. When there is a finding of unfair dismissal at tribunal, it is important that the claimant is fairly compensated for the loss they have suffered. We also believe that the cap on compensatory awards for unfair dismissal incentivises claimants to construct complex cases that allege both unfair dismissal and discrimination so as to access uncapped compensation, as I stated in my introductory remarks—perhaps Conservative Members did not hear that. By removing the compensatory award cap for unfair dismissal claims, that incentive will be lessened.

By removing the cap, the Government will also deter employs from treating the cost of dismissing employees unfairly as part of business as usual, instead ensuring that employees who face significant losses as a result of being unfairly dismissed are fairly compensated. Compensation for unfair dismissal is awarded only where a tribunal finds in favour of the claimant. Claims that do not have merit will not secure any compensatory award with or without a cap.

Lifting the cap will not mean that compensatory awards start from a blank sheet of paper and become impossible to anticipate. Tribunals have well established ways to calculate the compensation that might be awarded for particular types of losses resulting from unfair dismissal. I thank the Liberal Democrat spokesperson, the hon. Member for Richmond Park (Sarah Olney), for her support. As she referenced, and as Members will have heard in my introductory remarks, we will publish an economic assessment in due course, and I am always available for further discussion.

Conservative Members have opposed this Bill at every stage, and no matter what the issue was today, they would oppose it again. Businesses and unions have shown leadership, and Conservative Members and Parliament should respect their voice. The tripartite agreement was forged through dialogue with those who live the realities of our workplaces every day. That agreement included a package conducted in good faith and with good will, and I thank them for it.

This Government’s aim is clear: to conclude the passage of the Bill so that millions of British workers gain new rights while businesses can prepare for change with certainty. Labour Members send a clear message to the other place to now let the Bill—a Bill that delivers on multiple manifesto commitments and has a clear electoral mandate—pass. Any further delay risks leaving workers without protections and businesses without clarity. We now strive to conclude this process and deliver the change that Britian needs to make work pay. We cannot build a strong economy with people in insecure work. We are strengthening the foundations of our economy and improving living standards. The Bill, and all our work across Government, is the foundation for building an economy that works for everyone.

Question put.