The Employment Rights Act 2025 is a transformative piece of legislation intended to deliver the Government’s “Make Work Pay” programme. It amends and supplements the existing UK employment law framework (notably the Employment Rights Act 1996 and related legislation) through a package of measures which will be introduced in phases during 2026 and 2027.
It is imperative that employers have a clear understanding of the breadth of the changes and take timely, proactive measures to ready their workforce and operational practices to ensure compliance with these wide‑ranging reforms. We set out below some of the key changes and their impact.
Key changes introduced in the Employment Rights Act 2025
1. Day one rights to statutory sick pay, paternity leave and parental leave
Entitlements to statutory sick pay (SSP), paternity leave, and parental leave will be available from day 1 of employment.
The lower earnings limit for SSP will be removed, allowing low-paid, part-time, and zero-hours workers to qualify for SSP.
Employers should update their staff handbook policies and their payroll systems accordingly.
These changes take effect on 6 April 2026.
2. Qualifying period for unfair dismissal claims reduced to six months
The government reversed its commitment to introduce day one unfair dismissal protection. Instead, from 1 January 2027, any employee with six months’ service on or after 1 January 2027 will have unfair dismissal protection. This is a significant change that will have a great impact on employers, and on employment tribunals as the number of legal claims is expected to surge.
Employers should assess which employees will gain protection when the qualifying period changes and ensure that decisions about continuing employment are made in good time. If an employer wishes to dismiss because, for example, the employee is unsuitable for their role, this must be done within the early stages of employment. Onboarding processes, probationary periods in contracts, and performance management processes and policies should be reviewed to ensure that any issues arising with recent hires can be dealt with promptly.
3. Cap on compensation
The statutory cap on compensation for ordinary unfair dismissal will be removed.
This is a material development: in the absence of a cap, employers may find it more difficult to manage expectations and may face increased settlement costs, particularly in relation to higher‑paid employees.
The timing of this change has not been confirmed but it is anticipated to be 1 January 2027.
4. Employment tribunal claims
From October 2026, the time limit for presenting most Employment Tribunal claims will be extended to six months from the relevant date (for example, the effective date of termination), increasing from the current three months. This will afford claimants additional time to take advice, prepare their case and issue proceedings, and may lead to a material increase in the volume of claims. Employers may therefore place greater emphasis on early dispute resolution where litigation risk is apparent, to mitigate the prolonged period of uncertainty during which claims may be brought.
5. Employer duty to take ‘all reasonable steps’ to prevent sexual harassment
From October 2026, employers must take ‘all reasonable steps’ to prevent sexual harassment. Failure to do so will mean that employers will be liable for harassment, including third-party harassment perpetrated by individuals, including customers or clients of the business. This will be a particular consideration where employees have in-person contact (including at business / social events) with clients, suppliers, customers, members of the public etc.
Employers should review and update their sexual harassment and related policies and ensure that they deliver training to all staff to demonstrate their commitment to preventing harassment. Further regulations are expected in October 2027 which should clarify more precisely what is meant by “all reasonable steps”. Until then, employers should be guided by the Equality and Human Rights Commission guidance on sexual harassment, and best practice.
From 6 April 2026, a disclosure that sexual harassment has occurred, is occurring or is likely to occur will also become a qualifying disclosure for whistleblowing purposes, affording additional protection to workers.
6. ‘Fire and rehire’ or ‘fire and replace’
As of October 2026, a dismissal for not agreeing to core changes to an employment contract, such as in respect of pay, leave entitlement, shift patterns or hours, will be automatically unfair where it is intended to rehire or replace the employee, unless an employer can show that the business is in severe financial distress and there is no alternative.
Whilst this measure does not represent a complete ban on ‘fire and rehire’ as was contemplated, the new automatic unfair dismissal right will significantly strengthen employee protection.
7. Collective redundancy rights strengthened
As of 6 April 2026, the maximum award for failure to consult in a collective redundancy situation will be doubled from 90 days’ to 180 days’ pay.
In 2027, collective consultation will be required if 20 or more redundancies are proposed in one establishment, or if a different threshold is met over multiple establishments. Further details are expected to be set out in regulations in due course.
8. New rights for those with zero-hours contracts
In 2027, employees will be able to request a contract setting out the hours they routinely work during a reference period. They will be entitled to reasonable notice of shifts, and pay for cancellation or short notice of changes. Employers will not be able to demand exclusivity, preventing workers from working elsewhere.
Other measures include:
- Strengthening existing tipping law by requiring employers to consult with workers when developing or revising their tipping policies.
- Requiring employers to explain their rationale for denying a flexible working request; a decision to reject a request must be ‘reasonable’ as well as being for one of the eight specific business grounds.
- Establishing a new enforcement agency, the Fair Work Agency, which will be responsible for the enforcement of various employment rights including national minimum wage, holiday pay, statutory sick pay.
How 3CS can help
Our expert employment solicitors can support your business in preparing for the new statutory framework by reviewing and updating employment contracts, policies and procedures, and delivering targeted staff training. Practical guidance can also be provided to managers and HR teams to ensure probationary periods and performance management processes are robust and fit for purpose, and to mitigate litigation risk as the reforms are implemented.
For advice or guidance in respect of the new rules, please get in touch.
