Britain's leading business organisations have issued a stark warning to Conservative peers in the House of Lords: stop blocking the government's flagship workers' rights legislation or risk destroying a fragile compromise deal brokered with trade unions.
The Clock is Ticking on a Crucial Compromise
With Parliament set to rise for the Christmas recess on Thursday, time is running out to pass the Employment Rights Bill. In a significant intervention, six of the country's most influential employer groups have written to Business Secretary Peter Kyle, urging swift passage of the law to safeguard an agreement on unfair dismissal terms.
The signatories represent a powerful cross-section of UK business: the Confederation of British Industry (CBI), the British Chambers of Commerce, the Chartered Institute of Personnel and Development, the Federation of Small Businesses, the Recruitment and Employment Confederation, and Small Business Britain. Their collective message is clear: "Now is the time for parliament to pass the bill."
This plea follows a major policy reversal by Sir Keir Starmer's government last month. Labour abandoned a key manifesto pledge that would have granted workers protection from unfair dismissal from their very first day in a job. Instead of the current two-year qualifying period, ministers, after negotiations with most union leaders, proposed a compromise six-month waiting period. This climbdown sparked anger among some Labour backbenchers, who accused the government of betrayal.
Lords' Blockade and the City's Fears
Despite this compromise, Tory peers have voted down the bill four times in a row. Their primary objection centres on another part of the deal: the removal of the statutory cap on compensation for unfair dismissal. Currently, payouts for ordinary unfair dismissal are limited to the lower of an employee's annual salary or £118,223.
The removal of this cap has alarmed sectors with highly paid staff. TheCityUK, which represents banks and financial services firms, has written to ministers expressing concern. A source familiar with the letter told the Guardian that members felt "blindsided" by the amendment and fear it could lead to open-ended, unlimited compensation claims for highly paid bankers and executives.
The lobby group warns this could deter investment in the UK and make employers more hesitant about hiring decisions. Meanwhile, the business groups' letter, while urging the bill's passage, also states they remain "unsatisfied" with the scrapping of the compensation cap.
No More Concessions as Deadline Looms
Government ministers have vowed there will be no further compromises in a bid to force the legislation through before Christmas. The bill is expected to pass the Commons without amendment on Monday and return to the Lords on Tuesday. If peers insist on further changes, it will trigger more parliamentary "ping-pong," jeopardising its chance of receiving Royal Assent before the recess.
The employer groups argue that the focus should now shift to the secondary legislation phase that will follow the bill's main passage, where further adjustments can be discussed. Peter Kyle has pledged to listen to business concerns and hold 26 consultations after the bill becomes law.
In their letter, the business leaders warned that blocking the bill "could put cooperation between business leaders, the government and trade unions at risk" and could lead to the loss of the hard-won six-month compromise on unfair dismissal qualification. "To avoid losing the six months qualifying period, we therefore believe that now is the time for parliament to pass the bill," they wrote.
In response, Kyle stated Labour had made "difficult but necessary compromises" and promised that the spirit of consensus would continue during implementation.
The political backdrop remains charged. Under Kemi Badenoch, the Conservatives have sought to repair relations with business by promising to repeal Labour's employment rights changes. Shadow Business Secretary Andrew Griffith commented: "Different business groups will differ on the best tactic... but it's clear not a single one supports scrapping the cash cap, which only benefits high earners and will lead to fewer jobs and lower growth."
