The government has said it will push the Employment Rights Bill through parliament over the Christmas period after another defeat in the House of Lords, raising the prospect of MPs and peers being recalled in an effort to secure Royal Assent before the recess.
Ministers confirmed late on Thursday that the bill will return to the House of Commons on Monday before being sent back to the Lords by Tuesday, with Downing Street signalling it is prepared to schedule additional sittings if peers continue to block the legislation. The move follows a Lords vote against plans to lift the cap on unfair dismissal compensation, despite the government already retreating from its manifesto pledge on day-one dismissal rights.
The bill was defeated on Wednesday after Conservative and crossbench peers backed an amendment requiring a review of the compensation cap rather than allowing it to be lifted immediately. Ministers lost the vote by 24, sending the legislation back into parliamentary ping pong at a point when both employers and unions had expected the process to stabilise.
No further concessions promised
Ministers and trade unions reacted angrily to the defeat, accusing peers of undermining a negotiated settlement. A government source told the Guardian that Downing Street would not back down on lifting the cap, adding: “A deal’s a deal”.
The employment rights minister, Kate Dearden, said peers were obstructing legislation that the government had a clear electoral mandate to deliver. She said: “Tory peers and cross-party peers decided to vote against the government. And we’ve been really clear. This is a mandate that we were elected on.”
She said ministers were determined to press ahead so measures including earlier access to statutory sick pay, day-one paternity leave and stronger enforcement powers for the Fair Work Agency could be delivered. The Fair Work Agency is the proposed new body intended to enforce employment rights across the labour market.
“So we’re saying really clearly, when it goes back to the Commons on Monday and then back to the Lords, that they need to get behind this bill, so we can deliver for the millions of people who voted for us with this mandate and with a really clear message to make work pay again,” the minister said.
The bill already reflects a major concession. Labour dropped its pledge to introduce protection from unfair dismissal from the first day of employment, agreeing instead to a six-month qualifying period. The climbdown formed part of a deal with unions and employer groups, alongside an agreement to lift the existing compensation cap.
Employers face renewed uncertainty
For employers, the renewed confrontation has intensified uncertainty rather than resolving it. Nick Henderson-Mayo, head of compliance at VinciWorks, which provides compliance eLearning and workplace risk management software, told HRreview that the bill had entered “yet another phase of uncertainty” and warned that “businesses cannot assume that the current version of the bill will be the final one”.
He said the political stalemate mattered less than the operational impact. A survey by VinciWorks of 190 senior HR and compliance leaders found that only 3 percent believed the Lords would back down. A fifth believed the bill could fail entirely while 12 percent expected ministers to use the Parliament Act, extending the timeline into next year.
Henderson-Mayo said many organisations had paused planning around dismissal procedures and compensation exposure while waiting for clarity. He warned that continued uncertainty increased the risk of last-minute implementation work and unplanned costs.
Peers opposing the bill argue that lifting the compensation cap could expose employers to unlimited tribunal awards, including for high earners. Unions counter that the Lords amendment undermines a carefully negotiated compromise and risks derailing the entire reform package.
Mike Clancy, general secretary of Prospect, which represents professionals in sectors such as science, engineering and public services, said: “This deal was struck after painstaking negotiation to find a compromise that all sides could agree with.” He warned that further delay would only prolong uncertainty for workers and employers.
Parliament Act threat looms
With the Christmas recess approaching, ministers have not ruled out using the Parliament Act if peers continue to block the bill. That route would prevent the Lords from amending the legislation in the next session but would delay its passage and could reopen issues employers believed had been settled.
Henderson-Mayo said that outcome would carry particular risk for businesses, as it could restore day-one unfair dismissal rights. He said HR and compliance teams should continue planning around three possible scenarios: rapid agreement preserving the six-month threshold, further delay followed by use of the Parliament Act or a breakdown in negotiations altogether.
He added that employers wanted “a settlement that is clear, workable and deliverable”, warning that the renewed standoff showed how far away that settlement remains.
