Employment Rights Act 2025: The legal framework

Unfair dismissal: Earlier access to rights, significantly higher risk and financial exposure

What changes (with effect from 1 January 2027)? 

• The qualifying period for ordinary unfair dismissal will reduce from two years to six months.
• The statutory caps on compensatory awards for unfair dismissal will be removed entirely.

Impact:

• A substantial expansion of the protected workforce (estimated at over 6 million additional employees).
• Much greater financial exposure in dismissal claims, particularly for higher earners and those with poor re-employment prospects.
• Increased pressure on probation management, documentation and early-stage performance handling.
• Expected increase in tribunal activity, with knock-on effects for dispute resolution strategy.

 

Day-one and expanded family & sickness rights

What changes (from April 2026)?

• Statutory Sick Pay (SSP) payable from day one, with the Lower Earnings Limit removed.
• Day-one rights to paternity leave and unpaid parental leave.
• New and extended bereavement leave, including for early pregnancy loss.

Impact:

• Increased cost and administrative burden, particularly for lower-paid and short-service workforces.
• Need to update contracts, policies and payroll systems.
• Greater risk of discrimination and detriment claims linked to absence and leave handling.

 

Zero- and low-hours work: Reduced flexibility for employers

What changes (largely from 2027, subject to regulations)?

• New rights for qualifying workers to:
  • Guaranteed hours contracts reflecting actual working patterns.
  • Advance notice of shifts.
  • Compensation for cancelled or curtailed shifts.

Impact:

• A fundamental shift away from ‘one-sided flexibility’.
• Increased cost certainty for workers, but reduced operational agility for employers particularly in sectors such as hospitality, retail and social care.
• Likely need for workforce model redesign and closer monitoring of working patterns.

 

Collective redundancies: Higher stakes and wider triggers

What changes?

• The maximum protective award for failure to consult will double from 90 to 180 days’ pay (April 2026).
• A new organisation-wide redundancy trigger is proposed (details subject to consultation and regulations).

Impact:

• Significantly increased financial exposure in collective redundancy consultation failures.
• Greater complexity for large or multi-site employers, particularly during restructures.
• Heightened importance of early legal input and consultation planning.

 

Fire and rehire: Stronger statutory restrictions

What changes?

• ERA introduces statutory limits on ‘fire and rehire’ practices, with dismissals potentially becoming automatically unfair where statutory conditions are not met (expected Jan 2027).

Impact:

• Employers will face narrower scope to impose contractual change through dismissal.
• Greater reliance on collective consultation, incentives and negotiated variation.
• Increased litigation risk where business change is poorly evidenced.

 

Harassment, non-disclosure agreements and whistleblowing

What changes?

• Employers must take ‘all reasonable steps’ to prevent sexual harassment, including by third parties.
• NDAs preventing disclosure of harassment or discrimination will be void (with limited exceptions).
• Complaints of sexual harassment become qualifying disclosures for whistleblowing protection.

Impact:

• Higher expectations around training, culture and preventative measures.
• Reduced utility of NDAs in resolving disputes.
• Increased risk of uncapped whistleblowing detriment claims.

 

Trade unions and industrial action

What changes?

• Repeal of much of the Trade Union Act 2016.
• Simplified balloting, longer mandates and enhanced protections against dismissal for industrial action.

Impact:

• Lower barriers to lawful industrial action.
• Stronger union leverage in negotiations, particularly in unionised or public-facing sectors.

 

Enforcement: A shift towards proactive regulation

What changes?

• Creation of a new Fair Work Agency, consolidating enforcement of rights such as minimum wage, SSP and holiday pay.

Impact:

• Greater likelihood of proactive enforcement, not just individual claims.
• Increased importance of compliance audits and governance.