Employment Rights Act changes could cost Premier League clubs millions

Premier League clubs could be forced to pay millions in player dismissal fees when Labour changes to the Employment Rights Act come into force next year.

It comes as the UK’s unemployment rate reached a near five-year high on Tuesday morning.

The Employment Rights Act, a brainchild of former deputy Prime Minister Angela Rayner, will see changes to unfair dismissal introduced at the beginning of 2027, with the cap on pay-outs lifted entirely. At the moment, it is the smaller figure of either a year’s wages or £118,000.

But top City lawyers have warned that lifting the cap could impact Premier League clubs who send players out on loan before forcing them to find a new club, and others believe the days of football being immune to large pay-outs are coming to an end.

Millions of pounds on the line

“Compensation could run into hundreds of thousands of pounds or even millions depending on the seniority of the player and the possibility of future earnings,” Grosvenor Law senior associate Henna Elahi told City PM.

But it is not just players: former Arsenal kit man Mark Bonnick recently raised issues with the Gunners for unfair dismissal over his opposition to Israel.

Added Church Court Chambers barrister Yasin Patel: “A footballer’s playing time is limited, in some cases less than 15 years – this law change therefore could be very significant, especially when consider players who are loaned out by parent clubs as they no longer want them there and want to effectively force them to leave, or players who are made to train with “bomb-squads”.

It comes as Hogan Lovells partner Stefan Martin warns compensation as a result of the Employment Rights Act changes could “in theory” be unlimited.

“You’re probably going to see an impact in terms of dismissals at a higher level – there’s been some focus on the impact in professional football,” he added.

“But when that cap is taken off that could become quite a significant issue where you’re talking about really, really high earners. In theory, the compensation awarded could be unlimited.”

Employment Rights Act key

The wider Employment Rights Act has led to enacted or planned changes to statutory sick pay, leave, redundancy, tribunals, and the lifting of the unfair dismissal cap, all of which will be implemented over the next two years.

Concluded Elahi: “Financial planning around player exits will now become far more complex, and potentially very expensive.

“The removal of the statutory cap and reduction in the qualifying period will also likely lead to an increase in claims for unfair dismissal.”