The Employment Rights Act 2025

What employers need to know about the Employment Rights Act passed by parliament in December 2025.

The start of 2026 brought with it a significant shift in the UK employment landscape, following the passage of the Employment Rights Act 2025. After months of back and forth between the House of Commons and the House of Lords, the legislation finally received Royal Assent in December.

The Act is one of the most substantial updates to workplace rights in a generation and is designed to modernise employment protections, improve job security and strengthen enforcement.  It introduces a raft of new compliance obligations for employers.

While most of the changes will be phased in over the next two years, key early changes include the repeal of the Strikes (Minimum Service Levels) Act 2023 and parts of the Trade Union Act 2016, which took effect in December shortly after Royal Assent. Other measures, including day-one statutory sick pay and paternity leave, and the launch of the new Fair Work Agency, are expected from April this year.

Unfair dismissal: earlier exposure for employers

The reduction in the qualifying period for unfair dismissal claims which was one of the most closely watched reforms, will not take effect until 1 January 2027.

While the government stepped back from making unfair dismissal a day-one right, the new six-month qualifying period still significantly shortens the window during which employers can terminate employment without the risk of a claim for unfair dismissal.

The six-month qualifying period will apply to all employees who have six months’ service when the law comes into force in January 2027.  This means that employees joining in June and July 2026 will in effect be subject to the shorter qualifying period.

Additionally, the unfair dismissal compensation cap will be removed and the time limit for bringing Employment Tribunal claims will be extended from three months to six months.  This means there is likely to be an increase in both the volume and value of claims. This is particularly relevant given the existing backlog within the tribunal system, with such matters likely to remain unresolved for long periods.

These changes will mean that employers will need to have in place robust performance management processes, good record-keeping and fair procedures from the beginning of employment.

Zero-hours contracts, flexibility and guaranteed hours

The Act also targets zero hours contracts and what the government describes as historic one-sided flexibility on the part of employers, with new rights for workers on zero or low-hours contracts.  This includes access to guaranteed hours, reasonable notice of shifts and compensation for short-notice cancellations. Similar protections will apply to agency workers.

The main aim of the legislation is to avoid the mismatch between the employment contract and the number of hours worked, which means that the starting point for employers when preparing for these changes, will be to ensure that as far as possible the written employment contract matches the hours being worked each month.

These measures are intended to provide greater security for workers.  Employers in sectors that rely heavily on flexible staffing such as hospitality, retail and logistics will need to review their workforce carefully to assess which employees may be caught by the legislation and to ensure compliance without undermining operational needs. 

Family-friendly rights

There are a number of reforms to family and sick pay rights.   

For Statutory Sick Pay, the Lower Earnings Limit and the waiting period have been removed with effect from April 2026, which means that employees will be entitled to statutory sick pay from their first day of sickness.  This additional sick pay liability will be funded by the employer. 

Paternity leave and unpaid parental leave will become day-one rights, and there is to be a new right to unpaid bereavement leave, including for pregnancy loss before 24 weeks.

The Act strengthens protections aimed at improving gender equality in the workplace. Large employers will be required to produce action plans setting out how they are addressing gender pay gaps and supporting staff through menopause. Additionally, there will be new safeguards against dismissal for pregnant employees, those on maternity leave, and for at least six months after returning to work, except in defined circumstances.

Harassment

Employers will be required to take “all reasonable steps”, rather than simply “reasonable steps”, to prevent sexual harassment, including harassment by third parties. This change is likely to lead to increased requirements for training, policies and workplace culture.  

Enforcement and the Fair Work Agency

Another significant development is the creation of the Fair Work Agency, which will bring together enforcement of the National Minimum Wage, holiday pay, agency rules and labour exploitation. The Agency will have expanded powers, including the ability to bring tribunal claims on behalf of workers and impose civil penalties.

Planning ahead

Business reaction to the Employment Rights Act has been mixed, with concerns around cost, administration and flexibility needing to be balanced against the government’s aim of creating a more secure and productive workforce.

This package of changes will reshape how employers manage risk and processes over the next few years. The phased timetable gives businesses time to plan, but the priority now will be to review practice and procedure to ensure compliance when the changes  come into effect.