Key Points
- The Government has tabled a new amendment to the Employment Rights Bill to remove the statutory cap on compensation for ordinary unfair dismissal.
- If passed, compensation would be assessed based on actual financial loss, aligning unfair dismissal with discrimination and whistleblowing awards.
- A further amendment introduces a six-month qualifying period for unfair dismissal claims, expected to take effect from 1 January 2027.
- Uncapped claims could increase risk and settlement values for employers, especially regarding high earners or long-term unemployment losses.
- “Office frogging” — increasing strategic job-hopping across all age groups — is driving higher turnover, recruitment costs and retention challenges for UK employers.
Proposed Uncapped Compensation for Unfair Dismissal
Removal of Compensation Caps in Ordinary Unfair Dismissal Claims
The Government has tabled a new amendment to the Employment Rights Bill to lift the statutory cap on compensation for ordinary unfair dismissal.
Currently, in unfair dismissal cases, compensation is capped at the lower of either 52 weeks’ pay or £118,223.00. Under the proposed amendment, this statutory limit would be abolished, allowing tribunals to award compensation reflecting a claimant’s actual financial losses, similar to awards already available in discrimination and whistleblowing cases.
Status of the Employment Rights Bill
The Government has tabled amendments to remove the statutory compensation cap in relation to unfair dismissal cases and to reduce the qualifying period for unfair dismissal claims to six months. These amendments are scheduled for debate and consideration in the Commons on the 8th December 2025 (Known as "Consideration of Lords Message") and will then return to the Lords thereafter.
This is part of the “ping pong” stage between the House of Commons and the House of Lords, where amendments are exchanged between the two Houses until agreement is reached on the final text.
The Bill will receive Royal Assent once both Houses have reached final agreement on all amendments.
Why Has the Government Proposed Removing the Cap?
The proposal has emerged as part of a political compromise and stakeholder negotiation during passage of the Bill. Key drivers include:-
- Dropping “Day One” Unfair Dismissal: The Government originally planned to introduce day-one unfair dismissal rights, but opposition from business groups has led to withdrawal of that draft provision. As a compromise: (i) The qualifying period will instead be reduced to six months, and (ii) The statutory compensation cap would be removed.
- Securing Trade Union Support: Trade unions strongly supported uncapped compensation and pushed for the change after the day-one proposal was dropped. Removing the cap is a concession to support progression of the Bill.
- Deterrence Against Unfair Dismissal: Supporters argue that capped compensation allows some employers to “price in” dismissal risk. A lift on the cap aims to deter employers from unfairly dismissing staff, particularly high earners.
- Alignment with Other Employment Claims: At present, compensation in discrimination and whistleblowing cases is uncapped. Hence, removing the cap in unfair dismissal cases achieves consistency in how tribunals assess loss.
- Ensuring Full Compensation: Some claimants suffer losses greatly exceeding the present cap, including pension loss and reduced employability. The amendment aims to ensure tribunals can compensate for full actual loss where appropriate.
When Will the New Six-Month Qualifying Period Begin?
The reduction in the qualifying period from 2 years to 6 months for ordinary unfair dismissal is expected to come into force on the 1st January 2027. Hence, this would mean, for example, that workers beginning employment in July 2026 would have sufficient service to bring an unfair dismissal claim on or after 1 January 2027.
Practical Implications for Employers
Removing the statutory cap on compensation for ordinary unfair dismissal would:-
- Increase financial risk where claimants are high earners, long-serving, or close to retirement
- Significantly affect settlement negotiations, because upper-value claims would no longer be “anchored” to a known maximum
- Require employers to review HR policies, dismissal processes and internal documentation, particularly around capability, performance management, and redundancy selection
- Prompt employers to review any management liability or legal expenses insurance that includes employment tribunal cover, to ensure limits remain adequate under an uncapped regime
- Encourage earlier and more comprehensive legal advice before dismissal or restructuring decisions
It is important to note:
- Employment tribunals will still award compensation based on actual proven loss — uncapped does not mean unlimited
- Claimants remain subject to a duty to mitigate loss, meaning they must make reasonable efforts to find new work
- A very high proportion of unfair dismissal claims currently settle for well below existing caps — typically under £15,000
- Large awards are likely to arise only in cases involving senior employees, specialist roles, or long-term unemployment
In short, uncapping compensation would reshape risk calculation and negotiation strategy, but it will not automatically convert ordinary claims into high-value ones.
“Office Frogging”: A New Trend
What is “Office Frogging”?
The rise of hybrid working, labour shortages in key sectors, and shifting priorities among younger workers have accelerated a new trend in career mobility commonly referred to as “office frogging.” Unlike traditional job-hopping, this trend is driven less by dissatisfaction and more by strategic movement — workers intentionally “leap” between roles to build skills, increase pay, or gain better working conditions. With skills shortages and growing demand for flexibility, employers are experiencing higher turnover and greater competition for skilled talent, making office frogging an increasingly important factor in workforce planning and retention strategies.
Although often associated with Generation Z, research shows increased mobility across all age groups over the last two years.
What Drives Office Frogging?
Key reasons include:
- Pay stagnation
- Lack of internal progression
- Desire for meaningful work and values alignment
- Boredom or disengagement with job roles
- Lack of transparent or structured career pathways
Some workers also perceive regular movement as essential to achieving market value rather than waiting for incremental increases from one employer.
Impact on Employers
Employers face several consequences as a result of this new trend:
- Higher recruitment and onboarding costs
- Loss of organisational knowledge
- Skills shortages in critical roles
To counter increased turnover, employers should focus on:
- Flexible working policies
- Transparent promotion pathways
- Improved employee experience and retention strategies
- Investment in training and mentoring
- Competitive salaries and benefits
- Enhanced workplace culture and wellbeing initiatives
Considerations for Employees
Frequent job changes can improve pay and accelerate skills but may also cause:
- Perceptions of instability on CVs
- Concerns about loyalty or commitment
- Interview questions about short stays
Hence, employees need to have:
- Have a clear rationale for each move
- Maintain professional narratives around growth and development
- Avoid impulsive changes that lack strategy
