Welcome to our 5-minute round-up of people and workplace updates, hand-picked to help HR teams.

Catch up on:

Unlawful deductions from wages: bonus entitlement was fixed before an undisclosed cap was imposed by the employer

The Employment Appeal Tribunal (“EAT”) confirmed that an employer cannot retrospectively limit a bonus by introducing a cap after the entitlement has arisen. Once discretion is properly exercised and communicated, the employee’s right crystallises; even if the precise amount is calculated later. This is a clear warning against “moving the goalposts” in bonus schemes.

What happened?

The employer introduced a discretionary “kitty bonus” scheme in March 2020, under which employees could receive up to 1% of invoices generated from new deals within the first 12 months, subject to Sector Lead approval.

On 1 July 2020, the employee successfully concluded a new deal and his manager obtained approval from the Sector Lead for the full 1% bonus. After that approval was given, the employer sought to impose a previously undisclosed cap of $150,000 on the bonus and suggested that further internal approvals were required.

The employee brought a claim for unlawful deduction from wages in respect of the unpaid balance in the Employment Tribunal (“ET”).

The ET dismissed the claim, finding that the bonus had not crystallised into a legal entitlement on 1 July 2020, and that the entitlement only arose on 15 December 2020 (when the capped payment was formally communicated). The employee appealed to the EAT.

What did the EAT say?

The appeal was allowed. The EAT held that the bonus entitlement crystallised once Sector Lead approval had been obtained in accordance with the scheme rules. The fact that the employer later suggested that additional approvals were required did not prevent the entitlement from arising. The ET had been wrong to treat the entitlement as only arising once the capped payment was communicated. Because the cap had not been disclosed when the scheme was introduced, it could not be relied on to limit the employee’s entitlement after approval had been given.

Key takeaways:

  • A discretionary bonus can crystallise into a contractual entitlement once the relevant decision-maker has approved payment under the terms of the scheme.
  • Employers cannot rely on undisclosed caps or conditions introduced after approval to limit bonus payments.
  • Clear drafting and upfront communication of discretion, caps and approval processes are critical when putting bonuses in place.

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Philosophical belief: conduct rejecting “systemic racism” was not a manifestation of a protected belief in equal treatment

The EAT has overturned ET findings of direct belief and race discrimination, holding that rejecting systemic racism was not a manifestation of a protected belief in equal treatment.

What happened?

An NHS Trust disciplined an employee following several incidents. These included a heated argument with a black colleague, during which the employee used the offensive term “roadman”, and a workplace discussion about racism after the death of George Floyd, in which the employee rejected the concept of systemic racism and was alleged to have said that black people should not “hide behind their race”.

Following a disciplinary process, the Trust issued a final written warning and required the employee to complete unconscious bias training, a black allyship workshop and a written reflective exercise on systemic racism.

The employee brought claims of direct discrimination on grounds of philosophical belief in the ET, relying on a belief that people should be treated equally regardless of race or culture. He said that the statements he had made (and his rejection of systemic racism as a concept) were a manifestation of that protected belief. The ET upheld parts of the claim. It found that a belief that people should be treated equally regardless of race or culture did amount to a protected belief, and that rejecting systemic racism was a manifestation of that protected belief. The ET went on to find that aspects of the disciplinary process were discriminatory. The Trust appealed.

What did the EAT say?

The EAT held that the ET was wrong to find that rejecting systemic racism was a manifestation of a protected belief in equal treatment.

The ET had reasoned that there was an “undeniable link” between a belief in equal treatment and rejecting systemic racism. However, in the EAT’s view, believing people should be treated equally does not logically require accepting or rejecting the existence of systemic racism, which concerns structural inequality rather than individual characteristics. Because the two beliefs are not “intimately linked”, the rejection of systemic racism was not a manifestation of the protected belief of equal treatment.

Key takeaways:

  • Not every view expressed by an employee will qualify as a manifestation of a protected belief; a clear and direct link is required.
  • Employers can act in relation to inappropriate language or conduct impacting colleagues, but should take care doing so where an employee asserts an underlying protected belief. If the language or conduct in question is an (objectively) appropriate manifestation of a protected belief, and there is a clear and direct link between the two, taking action could amount to discrimination and therefore be unlawful. However, if the conduct is not an appropriate manifestation of a protected belief, or is not sufficiently closely linked to the protected belief, taking action may be lawful.

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Unfair dismissal reform: stakeholder feedback received

The Department for Business and Trade has published a summary of stakeholder feedback, on the upcoming reforms to the unfair dismissal regime under the Employment Right Acts 2025 (“ERA 2025”), which are due to take effect on 1 January 2027. The summary is notably brief and does not engage in any depth with the implications of widening eligibility for unfair dismissal claims at the same time as removing the compensation cap.

What happened?

On 1 January 2027, the removal of the statutory cap on the compensatory award for unfair dismissal (which is currently the lesser of one year’s salary or £123,543), and a reduction in the qualifying period for bringing a claim (from two years to six months), will come into force – meaning anyone with six months’ service at that point will have uncapped unfair dismissal rights and, if they bring a successful claim, will be entitled to an uncapped amount of compensation.

The feedback from employer and employee groups on these changes highlighted concerns that removing the compensation cap could impact business decisions, including where to base operations and recruitment (particularly for employers recruiting into highly paid roles). The summary does not examine how the changes may affect employers’ approach to managing senior executive exits, with stakeholders suggesting that guidance on performance management and dismissal at senior levels would be helpful – which it clearly would be.

A government impact assessment published in January 2026 estimated that reducing the qualifying period could extend unfair dismissal protection to an additional 6.3 million employees, leading to around 9,000 additional Acas early conciliation notifications per year and approximately 3,000 additional ET claims.

What does this mean for employers?

  • Employers must anticipate increased exposure, particularly in relation to senior or highly paid roles and where the chances of the employee getting another job are slim (for example due to age), and plan accordingly.
  • A whole new approach will be needed for recruitment and exit strategies for senior hires.
  • Employers must ensure that performance management and probation processes are robust, consistent and timely.
  • The Government has indicated that further guidance on the practical application of the changes will be issued, which employers should keep up to date on, digest and follow.
  • Old case law, about the fact that the most senior people do not need the same kind of performance management as less senior people, will become increasingly well-known and relied upon – by braver employers in the first instance and until those cases are re-tested in the modern world.

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Fit note reform: stakeholder feedback received

The Department for Work and Pensions and the Department of Health and Social Care has published findings from a call for evidence on fit notes, which focused on how the process supports work and health conversations, and how it could better help individuals start, stay at and succeed in work.

What happened?

Responses revealed a range of perspectives:

  • Patients and charities were broadly positive, describing the system as simple and accessible, supporting recovery and access to sick pay. They emphasised the need for more in-depth work and health conversations, particularly for long-term or complex conditions, and supported clearer guidance on workplace adjustments and greater links to occupational health.
  • Employers generally found the process ineffective, raising concerns about the ease of obtaining fit notes without a face-to-face assessment and the limited understanding among healthcare professionals of workplace contexts. There were also calls for clearer guidance on workplace adjustments, more realistic return-to-work timelines, and greater involvement of occupational health services.
  • Clinicians reported mixed views. Most supported a clinician-led system; however, some favoured expanding certification to other healthcare professionals to ease pressure on GPs. Common barriers to effective work and health conversations included time constraints, lack of workplace knowledge and patient expectations. While face-to-face interactions were preferred, digital tools were acknowledged to improve access and efficiency, though concerns remained around diagnostic accuracy and inclusivity.

The Government has announced the launch of several pilots in England intended to overhaul the “broken” fit note system.

What should employers do now?

  • Employers should have effective work and health conversations with employees at an early stage.
  • Employers should not rely solely on fit notes when managing absence, particularly where they lack detail on adjustments or return-to-work planning workplace OH can provide a range of additional data upon which to act.

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If you have any questions on anything outlined above, get in contact with Paul Seath.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further advice.