The Employment Rights Bill, described as the most significant overhaul of UK employee protections in generations, received Royal Assent on 18 December 2025, becoming the Employment Rights Act 2025 (ERA 2025). The legislation introduces modernised workplace rights, including flexible working, secure hours and robust anti-discrimination measures.
Key changes at a glance
The below provides a brief overview of the key changes introduced by the ERA 2025. These will take effect within the next 12-24 months and will be examined in greater detail throughout this article.
- Unfair dismissal: From 1 January 2027, the qualifying period for unfair dismissal drops to six months and the cap on compensation is abolished, allowing unlimited awards.
- Zero hours and shift workers: New rights will guarantee minimum hours, advance notice of shifts, and compensation for short-notice cancellations.
- Fire and rehire: Dismissals for refusing significant contractual changes will be automatically unfair, subject to limited exceptions.
- Statutory sick pay (SSP): Day one entitlement will be introduced, with removal of earnings thresholds and the 3 waiting days. SSP will be payable at 80% of earnings for those earning under the lower earnings threshold, or a flat rate (current £118.75 per week).
- Family-friendly rights: Paternity and unpaid parental leave become day one rights, alongside a new entitlement to bereavement leave for earlier pregnancy loss.
- Flexible working: Employees can currently request flexible arrangements from day one, but the ERA 2024 means refusals must be based on reasonable grounds.
- Harassment protections: Employers face an enhanced statutory duty to prevent sexual harassment, liability for third-party harassment, and whistleblowing protections now cover sexual harassment disclosures.
- Collective redundancy: Maximum protective award for failure to follow collective consultation rules doubles from 90 to 180 days’ pay, with tighter consultation thresholds.
- Trade union relations: Minimum service level laws during industrial action repealed, union recognition simplified, and electronic balloting introduced.
- Fair Work Agency: A new enforcement body will oversee compliance on holiday pay, sick pay, unfair dismissal, and other core rights.
1) Day one protection against unfair dismissal rights removed
One of the most anticipated proposals in the Employment Rights Bill was the introduction of day one protection against unfair dismissal. However, this provision did not make it into the ERA 2025. Due to resistance in the House of Lords, the Government ultimately decided to retain a qualifying period, albeit significantly reduced.
Under the ERA 2025, the qualifying period for bringing an unfair dismissal claim will drop from two years to six months, effective from 1 January 2027. This change represents a major shift in employee rights and a need for effectively managed recruitment and probation processes, but it stops short of granting immediate protection from the first day of employment.
2) Removal of compensation limits for unfair dismissal
As a compromise for dropping proposals for unfair dismissal to be a day one right, the ERA 2025 introduces a landmark change by removing the statutory cap on compensation for unfair dismissal claims. Previously, other than for limited exceptions such as automatic unfair dismissal for whistleblowing, compensation was subject to a maximum limit (currently £118,223 or 52-weeks’ gross pay, whichever is lower). Under the new regime, this ceiling will no longer apply, allowing tribunals to award uncapped compensation based on actual and future losses, which may extend well beyond one year’s pay.
Why this matters
- Greater financial exposure for employers: The removal of the cap means awards could significantly exceed previous limits, particularly for senior employees with high earnings or long-term loss of income.
- Alignment with discrimination claims: This change brings unfair dismissal compensation closer to discrimination and whistleblowing claims, which have always been uncapped.
When does it apply?
It’s anticipated that the uncapped compensation rule will take effect for dismissals occurring on or after 1 January 2027, alongside the reduced qualifying period for unfair dismissal claims of six months.
Implications for employers
- Risk management: Employers should anticipate higher and less predictable potential liabilities and factor this into settlement strategies and litigation risk assessments, particularly in reorganisation and business sales.
- Policy and process review: Robust disciplinary and dismissal procedures will be critical to avoid costly claims.
3) Collective redundancy reforms
The ERA 2025 introduces several changes to collective redundancy rules, but the outcome is a mixed bag for employers and employees alike. While some reforms strengthen employee protections, others aim to streamline processes and reduce administrative burdens. These changes are anticipated to potentially commence from 6 April 2026.
Key changes
- Protective award increase: The maximum protective award for failure to consult will double from 90 days’ pay to 180 days’ pay, significantly raising the stakes for non-compliance, and could cost a business half its annual payroll costs if a collective consultation is handled badly.
- Consultation threshold tightened: These changes are planned for some point in 2027, and employers will need to start consultation earlier and ensure more rigorous engagement when proposing large-scale redundancies. There is also the potential that the minimum consultation period where 100 or more redundancies are proposed will increase from 45 days to 90 days.
- Electronic communication: The Act permits greater use of electronic methods for consultation and information sharing, reducing logistical challenges for multi-site employers.
- Simplified notification: While consultation obligations remain robust, the requirement to notify the Secretary of State has been streamlined to online notification to avoid unnecessary duplication.
4) Restrictions on fire and rehire
The ERA 2025 introduces significant restrictions on the controversial practice of fire and rehire but stops short of an outright ban. Instead, the Act aims to soften the impact by imposing stricter conditions and procedural safeguards. These changes are anticipated to take effect in October 2026.
What’s changed?
- Automatic unfair dismissal: Dismissing an employee for refusing substantial contractual changes—such as pay cuts or reduced hours—will now be deemed automatically unfair, except in very limited circumstances and where there is genuinely no alternative option to saving a business as a going concern. It will also be unlawful to dismiss an employee in order to replace them with another person on varied terms to carry out substantially the same role.
- Mandatory consultation: Employers must engage in meaningful consultation before proposing contractual changes, including exploring alternatives and documenting the process.
- Notification requirements: Employers will need to provide clear written notice outlining the business rationale for changes and the potential consequences of refusal.
Fire and rehire will no longer be a practical option for employers when restructuring in most circumstances. This means that redundancy or other reorganisational tools will need to be deployed, or sufficient incentives will need to be provided to ensure employee agreement to the proposed changes to terms and conditions.
5) Shift scheduling and guaranteed hours
The ERA 2025 introduces new protections for workers on zero-hours contracts and variable shift arrangements, aiming to provide greater certainty and fairness. However, these reforms, which are planned to take effect some point in 2027 also add layers of complexity for employers managing flexible workforces.
Key changes
- Right to guaranteed hours: Workers will have the right to request a contract reflecting their average hours after 12 weeks of service, reducing reliance on purely casual arrangements.
- Advance notice of shifts: Employers must provide reasonable notice of upcoming shifts. Failure to do so may trigger compensation obligations.
- Compensation for cancellations: If a shift is cancelled at short notice, employers will be required to pay a cancellation fee, calculated based on the scheduled hours.
While these measures aim to curb exploitative practices, they introduce operational challenges:
- Scheduling systems: Businesses will need robust systems to track average hours and manage guaranteed hours requests.
- Cost implications: Compensation for cancelled shifts and guaranteed hours may increase payroll costs.
- Compliance risk: Failure to meet notice requirements or process requests correctly could lead to claims and reputational damage.
6) Family leave and flexible working
Despite speculation during the consultation phase, the ERA 2025 does not introduce sweeping changes to family leave or flexible working rights. Instead, the Act consolidates existing entitlements and reinforces the principle of accessibility from day one, including making statutory unpaid parental leave and statutory paternity leave day one rights in April 2026.
Also currently, in considering flexible working requests employers need to rely on one or more of the prescribed business reasons for rejecting that request. From 2027, employers must also show it was reasonable to rely on such reasons, meaning there will be a need to demonstrate that a decision was evidenced-based and properly considered.
7) Family rights – bereavement leave for pregnancy loss
Currently, UK law only provides statutory bereavement leave for stillbirths after 24 weeks of pregnancy or the death of a child aged under 18 years. This leaves employees experiencing early pregnancy loss without formal support. The ERA 2025 addresses this gap, recognising the emotional and physical impact of early pregnancy loss and ensuring employees have protected time to grieve. This extension in statutory parental bereavement leave is expected to take effect at some point in 2027.
8) Duty to prevent sexual harassment and third-party harassment
The ERA 2025 does not redefine harassment and the legal test remains anchored in the Equality Act 2010. Instead, the change focuses on strengthening employer duties. Since October 2024, employers have to take ‘reasonable steps’ to prevent sexual harassment. It’s expected that from October 2026, the new standard will require ‘all reasonable steps’ to be taken, raising the bar significantly for proactive prevention. This shift reflects growing concern about workplace culture and the need for stronger accountability, particularly following high-profile cases and increased scrutiny of non-disclosure agreements (NDAs) in harassment complaints.
Significantly, employers will be liable for all forms of harassment by third parties against their employees, if they fail to take all reasonable steps to prevent such harassment taking place. This will include harassment by customers, clients, contractors, visitors and members of the public if employees have contact with the public in their role.
Practical implications for employers
- Enhanced duty of care: Employers must demonstrate robust measures to prevent harassment, including comprehensive policies, risk assessments, and regular staff training.
- Third-party harassment: The duty extends to harassment by clients, contractors, and other third parties, requiring businesses to review external interaction protocols and assessing these risks.
- NDAs restricted: Although no date has been provided, there are plans that confidentiality clauses will no longer lawfully prevent employees from reporting harassment and discrimination of all forms under the Equality Act, meaning settlement agreements must be carefully reviewed. However, from 6 April 2026 a disclosure of sexual harassment made in the public interest will have the same status as other protected whistleblowing disclosures. This means it will be unlawful to seek to prevent such disclosures being made, or to subject that person to any detriment or dismissal for making the disclosure.
9) The Fair Work Agency
The ERA 2025 introduces the Fair Work Agency (FWA), which should be established in April 2026. The Agency will create an empowered, centralised enforcement body that marks a radical departure from the fragmented system based on individual enforcement currently in place. Where workers previously had to individually pursue claims through tribunals or rely on multiple regulators, the FWA consolidates these roles into a single entity. Crucially, the FWA will be granted direct enforcement powers covering holiday pay, statutory sick pay, minimum wage, and more with the ability to investigate unilaterally, impose penalties, and publicly name non-compliant employers. The government’s intention is clearly to shift enforcement upstream, reduce reliance on tribunals, and bolster protections for vulnerable workers.
Practical steps for employers
- Review payroll and records systems: Ensure accurate tracking of holiday pay, sick pay, and minimum wage compliance. The FWA will have access to these records and the power to impose criminal penalties for non-compliance, particularly around holiday pay.
- Prepare for inspections and audits: The FWA can perform unannounced workplace inspections, request documents, and interview staff—much like HMRC does for minimum wage violations. Have clear systems in place for rapid and transparent responses.
- Understand new penalties: The FWA can issue notices requiring payments (e.g., underpayments of pay entitlements) within 28 days and impose fines up to 200% of the owed amount recoverable from up to six years prior.
- Engage proactively: The agency is intended to offer support and guidance for compliant employers. Be ready to engage proactively with any informal inquiries or early intervention notifications.
- Prepare for wider coverage: While initial powers cover agency work, minimum wage, holiday pay, sick pay, and labour exploitation, future secondary legislation may broaden the FWA’s remit to areas such as tribunal orders, pay transparency, and umbrella company regulation.
10) Strengthened trade union rights
Why this matters
The ERA 2025 significantly strengthens employees’ collective rights and the rights for trade unions in the workplace. The immediate effect of the ERA 2025 becoming law on 18 December 2025 was to repeal the minimum service requirements during industrial action for certain sectors.
Simplified statutory recognition
From April 2026, unions will be able to apply to the Central Arbitration Committee (CAC) for recognition with a lower density of membership—potentially as low as 2%, down from the previous 10% threshold, set by secondary legislation. Additionally, the requirement to demonstrate likely majority support is removed, and union recognition ballots will only require a simple majority of votes cast, eliminating the prior 40% turnout threshold.
Furthermore, employers should anticipate more frequent union recognition applications and update their industrial relations strategies accordingly.
New union access rights
Planned for October 2026, trade unions will gain statutory rights to access workplaces to recruit and represent employees—subject to employer-negotiated voluntary agreements, or determined by CAC if no agreement can be reached.
Furthermore, employers need to engage constructively early on, prepare policies for union access, and define protocols to balance union rights with operational considerations.
Added protections for members and representatives
It’s anticipated that from October 2026, legal protections will be expanded to protect members and employees against detriments by their employer for taking part in protected industrial action which falls short of dismissal. Also, electronic balloting for industrial action will be permitted from April 2026, and mandates from such ballots for industrial action will be increased to 12 months. Additionally, the notice period unions must provide to employers of industrial action is reduced from 14 to 10 days. From October 2026, all employers will also be obligated to explicitly inform new starters in their written particulars of employment of their right to join a trade union.
11) Non-disclosure agreements
Although no date for commencement has been provided, the ERA 2025 introduces a landmark restriction on the use of NDAs in cases involving harassment, discrimination, or other unlawful workplace conduct. Currently, NDAs on any aspect of employment are often included in settlement agreements to prevent employees from speaking about their experiences. This reform responds to growing public concern and high-profile cases where NDAs were misused to conceal wrongdoing, ensuring transparency and accountability in workplace practices. Whilst the ERA may provide an exception to this where an employee seeks an NDA (and is given independent legal advice beforehand), the details of how wide these exceptions will remain to be seen.
Practical steps for employers
- Review settlement templates: Remove any clauses that restrict employees from reporting harassment, discrimination, or whistleblowing to regulators, law enforcement, or support services.
- Update policies and training: Ensure HR teams and managers understand the new limits on confidentiality provisions and avoid drafting agreements that could be unenforceable.
- Communicate clearly: Inform employees that while confidentiality may still apply to financial terms or personal data, it cannot prevent disclosure of discriminatory conduct.
- Audit existing agreements: Check historic settlement agreements for compliance and prepare for potential disclosures without retaliatory action.
- Prepare for cultural shift: Encourage open reporting and strengthen internal grievance procedures to align with the Act’s transparency objectives.
The restriction on NDAs for harassment and discrimination cases will mark a decisive move toward openness, transparency and accountability. Employers can no longer expect confidentiality clauses to suppress reports of unlawful behaviour. Instead, they must foster a culture of trust, ensure agreements comply with the new legal framework, and proactively support employees who come forward. This change not only mitigates legal risk but also reinforces ethical standards and corporate reputation.
Conclusion
The ERA 2025 is bringing in a huge raft of changes, representing the biggest shift in employment law in the last 50 years. Employers will need to quickly prepare, with 2026-2027 being an exceptional period of change as the legal landscape rapidly moves in line with the ERA 2025. As the details of various reforms become clearer through the publication of secondary legislation, we’ll continue to report on the changes.
Our expert Employment and Immigration team are here to help you make sense of this new world of employment law, including what you can do to prepare and adapt.
You can also sign up to our free upcoming Breakfast Briefing on the ERA on 13 January 2025. We’ll provide a round up of 2025’s employment law changes and look ahead at what’s to come in 2026.
How can we help?
For further information about issues raised in this article, please contact a member of our Employment team.
