Navigating the Employment Rights Bill 2025: What Employers Need to Know

The Employment Rights Bill 2025 has now passed into law, receiving Royal Assent on 18 December 2025 and becoming the Employment Rights Act 2025 (“ERA 2025”). ERA 2025 lays the groundwork for substantial reform to UK employment law, however, before they can be implemented many of its provisions will be subject to further consultation and regulations. There will be a phased implementation timetable, with most provisions expected to come into force in April 2026, October 2026, or April or October 2027.

Most notably, the reduction in the qualifying service period for unfair dismissal claims and the removal of the statutory compensation cap are anticipated to come into force in January 2027. Employers across all sectors should begin preparing now for the wide-ranging changes that will affect recruitment, dismissal, workplace culture, and employee rights.

Day One Protection: A New Era for Unfair Dismissal

At present, employees must have two years’ continuous service to bring an unfair dismissal claim. Compensation for unfair dismissal is capped at the lower of one year’s pay or the statutory maximum (currently £118,223 and subject to annual review).

Under the ERA 2025 the qualifying service requirement will be reduced to six months instead of the “day one” right initially proposed. However, this significantly extends unfair dismissal protection to many more employees. In addition, the statutory cap on compensation will be removed entirely, meaning tribunals will be able to make uncapped awards, in line with discrimination and whistleblowing claims. The government will conduct an impact assessment on this before implementation – but has not committed to a formal public consultation.

These reforms represent a substantial shift and are likely to increase both the number and cost of unfair dismissal claims and compensation sought. Employers will need to rethink how they manage new hires, with greater emphasis on recruitment due diligence, onboarding, remuneration and early performance management.

Fire and Re-Hire Under Scrutiny

The ERA 2025 introduces new restrictions on the practice of ‘fire and re-hire.’ While not banned outright, it will become automatically unfair to dismiss an employee for refusing certain contract changes – particularly those affecting pay, pensions, or working hours – unless the employer can demonstrate financial necessity and that no reasonable alternatives were available. Employers will need to consult meaningfully with affected staff and follow the Statutory Code of Practice to avoid costly tribunal claims and reputational damage. These reforms will significantly reduce employer flexibility to change terms and conditions, making careful contract drafting and workforce planning essential. Changes to take effect from October 2026.

Collective Redundancy: A Wider Scope

Currently, collective consultation obligations apply when 20 or more redundancies are proposed at a single site. The ERA 2025 expands this to cover redundancies across multiple locations within the same business. The maximum protective award for non-compliance will double from 90 to 180 days’ gross pay. This change will require employers to take a more strategic view of workforce planning and ensure consultation procedures are consistent across all sites. Implementation is expected in April 2026 (increased penalty) and 2027 (new consultation threshold).

Tackling Harassment and NDA Reform

Employers will face a new duty to take all reasonable steps to prevent sexual harassment in the workplace, including harassment by third parties such as clients or suppliers. Regulations will set out expected measures, including risk assessments, clear policies, and effective complaints procedures. The ERA 2025 also restricts the use of non-disclosure agreements (NDAs), making clauses that prevent workers from discussing harassment or discrimination void, although NDAs may still protect trade secrets or sensitive commercial information. Employers should review and update policies, training programmes and reporting mechanisms to ensure compliance and effectively manage legal risk. The substantive changes will come into place in October 2026 while the regulations setting out steps regarded as reasonable will only take effect in 2027. Complaints of sexual harassment will attract whistleblowing protection, meaning employees who are dismissed or subjected to detriment in connection with a complaint could bring a whistleblowing claim and seek interim relief (expected to take effect April 2026).

Supporting Employee Wellbeing

The ERA 2025 expands statutory sick pay (SSP) to all workers, removing the three-day waiting period and the earnings threshold, with SSP set at 80% of average earnings for those below the statutory rate. The National Minimum and Living Wage will reflect the cost of living and apply to all workers aged 18 and over. Employers will also have a new duty to keep records of holiday entitlement and pay for at least six years. These changes will increase wage costs and require employers to review sick pay policies, holiday records, and holiday pay calculations. Implementation is expected from April 2026.

Expanding Family Rights

The ERA 2025 extends key family leave protections. Paternity leave and unpaid parental leave will become a day one right, and employees can now take paternity leave following shared parental leave. Dismissal during pregnancy, maternity, adoption, shared parental leave, or within six months of returning to work will be unlawful, except in certain regulated circumstances. The consultation on these closes in January 2026. Parental bereavement leave will also be extended to cover additional family members, including pregnancy loss. Employers should review policies, processes, and training to ensure compliance. Implementation is expected in April 2026 for day one leave, and 2027 for dismissal protection and bereavement leave.

Flexible Working and the Right to Disconnect

The ERA 2025 strengthens employees’ rights to request flexible working by requiring any refusal to be reasonable. Employers must explain the grounds for refusal and consult with the employee before declining a request, with regulations expected to specify the consultation steps. While employers can still refuse requests on specified business grounds, these changes may affect how refusals are assessed by tribunals. Employers should review flexible working policies and practices and ensure managers are trained to handle requests in line with the new requirements. Implementation is expected from 2027.

The government also plans to introduce a statutory Right to Disconnect, allowing employees to disengage from work outside contracted hours. These changes reflect a growing emphasis on work-life balance and will require employers to rethink how they manage flexible arrangements and employee wellbeing.

Regulating Zero-Hour Contracts

The ERA 2025 strengthens protections for zero-hours and irregular-hours workers. Those whose hours regularly exceed their contract over a 12-week period must be offered a contract reflecting their actual hours. Employers must give reasonable notice of shifts and provide compensation for short-notice cancellations or changes. These rights also apply to agency workers, with hirers responsible for offering regular hours contracts and agencies liable for cancellation payments. While zero-hours contracts are not being banned, the reforms aim to provide greater certainty and fairness. Employers should review contracts, shift practices, and cancellation policies ahead of implementation in 2027.

Strengthening Trade Union Rights

The ERA 2025 makes it easier for unions to organise and take industrial action, with relaxed ballot rules, electronic voting, and simplified recognition processes. Employers must inform employees of their right to join a union, and unions gain greater access and representative rights. Sector-wide collective bargaining will start in social care, and workers get stronger protection from blacklisting. Some changes are due to take effect in April 2026 and the remainder in October 2026.

Enforcement and Tribunal Changes

The ERA 2025 increases the time limit for bringing Employment Tribunal claims from three to six months and establishes a new Fair Work Agency to enforce workers’ rights. The Agency will consolidate existing enforcement functions and have broad powers to enforce holiday pay, statutory sick pay, the National Minimum Wage, unpaid tribunal awards, and holiday recordkeeping duties. It can require information, enter premises, issue penalties, bring claims on behalf of workers, and recover costs. These changes are expected to make it easier for workers to enforce their rights and could increase scrutiny on complex areas such as holiday pay. Implementation is expected from April 2026 for the Agency and October 2026 for extended Tribunal time limits.

Take Action Now

The ERA 2025 will bring sweeping changes to how businesses manage their workforce. While many measures won’t take effect until late 2026 or 2027, some changes will take effect this April and early preparation is essential. Employers should begin reviewing contracts, updating policies, and training managers to ensure compliance and reduce risk.

At Machins LLP, our employment law team is ready to help you navigate these reforms. Whether you need strategic advice, policy reviews, or support with training and implementation, we offer practical, tailored solutions to protect your business.  To get in touch please click here.