M&P Legal head of employment John Aycock reviews some big changes in labour law happening in England and considers comparative law in Isle of Man.

The Isle of Man’s employment law has long differed from the English law regime but with the pending material changes in the UK that divergence seems to be growing deeper.

Sir Keir Starmer’s government introduced the Employment Rights Act 2025 of Parliament as a key pillar of their plan to “grow the economy, boost wages and reduce insecure work” (according to their Department for Business and Trade). The Act makes numerous changes to labour law in England for instance involving zero hour contracts, fire and re-hire practices, collective redundancy rights, statutory sick pay and many family friendly rights. Time limits for making most Tribunal claims will also double to six months.

The really eye-catching alterations however are those introduced late in the Bill’s progress whereby the unfair dismissal qualifying period was reduced and the Tribunal’s compensation award cap removed. These are fundamental shifts in longstanding employment protection laws in England and Wales. They do not affect the Isle of Man’s employment protection laws.

The new English law reduces the ordinary unfair dismissal qualifying period from two years to six months (this does not apply to certain dismissal claims that do not need any qualifying period which remains a common feature of UK and Manx employment law). A Westminster impact assessment of the Employment Rights Act 2025 estimates that the reduction in the qualifying period brings a further 6.3 million employees into the protective net. In turn, this will generate annually an extra 9,000 ACAS early conciliation referrals which will evolve into 3,000 more Tribunal claims of which 570 will proceed to trial. As the impact assessment says, this is the largest effect on the Tribunal system of any of the measures in this new law.

The UK government found that predicting the impact of removing the compensation cap is not so formulaic. Westminster’s impact assessment says the impact will depend on the “behavioural response” of employers and employees but there is recognition that it will particularly benefit higher earning employees and those with limited re-employment opportunities. Some commentators have remarked that sacked Premier League football managers might now show an interest in statutory unfair dismissal claims because their multi million pound packages would justify pursuing such uncapped claims.

The Employment Rights Act 2025 of Westminster is being delivered in phases over a two year period. At present, English unfair dismissal maximum compensatory award is the lower of twelve months’ salary or £118,223. The statutory weekly pay amount is capped at £719. By contrast, the Isle of Man’s statutory caps (in place since August 2016) are £56,000 compensatory award and £540 for a maximum amount of a week’s pay.

The Isle of Man’s ordinary unfair dismissal qualifying period has long been one year with the Island resisting the temptation to mimic the UK’s shifting between one and two years and soon to be six months (an earlier proposal that the qualifying period be from day one was ultimately voted down at Westminster).

These changes deepen the divergence between the Manx and English statutory employment protection regime. There remains doubt as to how much the Act will affect UK business and the Tribunal system, which some say is already overburdened. The benefits of managing an employment protection regime in a much smaller jurisdiction are there for all to see. The Isle of Man has a stable employment law framework with efficient Manx Industrial Relations Service conciliation services and an accessible Employment & Equality Tribunal for those disputes not successfully conciliated.

The island’s legislators are prudent not to knee jerk react to neighbouring jurisdictions redrawing their employment protection rules. The UK flipflopping on important matters such as employment law emanates from its adversarial party system which sees regular change in political colour and consequent making and repealing of laws. The Isle of Man’s more mature system promotes a stability which helps put the island’s interests first.

Advocate John Aycock has 35 years’ labour law experience in three different jurisdictions. This article is not legal advice. Always seek specific legal advice on the facts of each particular case.

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