Bold claim: Britain’s top business groups are urging Conservative peers to stop blocking Labour’s workers’ rights bill, warning that doing so would blow up a delicate compromise with unions. And this is where the controversy starts: time is running out before Christmas, and failing to pass the bill could derail a deal already brokered with bosses and union leaders.
Six major employers’ associations—the Confederation of British Industry, 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—told the business secretary, Peter Kyle, that Parliament must act now. They argue that letting the legislation stall until Parliament rises on Thursday would jeopardize the negotiated agreement reached with employer groups and unions.
Labour had recently reversed a manifesto pledge by dropping the rule that workers are protected from unfair dismissal from day one of employment, instead moving to a six-month safeguard as part of a broader deal with trade unions. The government then tabled a compromise alongside ministers: a six-month probationary period for certain protections. This climbdown sparked anger among some Labour backbenchers, who accused Keir Starmer’s administration of betrayal.
Despite these tensions, peers rejected the bill for the fourth time, ruling against amendments drafted by Tory peers who protested the compromise that lifted a cap on compensation for unfair dismissal. Some business leaders warned that raising the cap could allow high earners to claim unlimited damages, prompting concerns about costs for employers.
Currently, workers can receive a payout equal to the lesser of their annual salary or £118,223 if they win an ordinary unfair dismissal claim.
TheCityUK, which represents banks and other financial services firms, wrote to ministers after the surprise amendment to the employment rights bill left its members feeling blindsided. A source cited concerns that unlimited payouts for high earners could deter investment in the UK and make bosses hesitant to hire.
Ministers have signaled they won’t concede further on the bill and may bring the legislation back for further parliamentary sessions if needed. The bill is expected to pass the Commons without amendments on Monday and return to the Lords on Tuesday. Any additional amendments in the Lords would trigger another round of readings between the two houses before royal assent.
In their letter, the business groups urged a focus on securing compromises through secondary legislation after primary passage. Kyle has pledged to listen to business concerns and conduct 26 consultations once the bill becomes law.
The lobby groups warned that continuing to block the bill could undermine cooperation among business leaders, government, and unions, potentially jeopardizing the six-month compromise.
“We believe the best path forward is to keep negotiating with the government and trade unions to develop balanced solutions through secondary legislation. To avoid losing the six-month window, Parliament should pass the bill now.”
Kyle responded by noting Labour’s difficult but necessary compromises to move the measure ahead. He emphasized a continued spirit of consensus and cooperation as royal assent nears.
Business leaders have argued that the worker protections could come with costs: job cuts or higher prices that might fuel inflation. Under the Conservative leadership of Kemi Badenoch, the party has sought to repair ties with business by signaling a willingness to revisit Labour’s changes to employment rights.
While the business groups pressed for passage, they retained concerns about removing the compensation cap. Andrew Griffith, Labour’s shadow business secretary, warned that different business groups may vary on tactics, but none support scrapping the cap, saying it would benefit high earners at the expense of jobs and growth.
Would you support maintaining a capped compensation framework, or do you think higher caps are essential to ensure fair redress for dismissed workers? Share your thoughts in the comments.
