Employment Rights Act 2025 – key points employers need to know now

Greater protection for employees, more complexity for employers, and a need for careful planning over the next two years.

Following some late parliamentary ping-pong, the Employment Rights Bill has now received Royal Assent, marking the most significant overhaul of UK employment law in a generation. Below is a summary of the key changes in the Employment Rights Act 2025 ("ERA 2025").

Unfair dismissal: shorter qualifying period and uncapped compensation

The change that has been making the headlines is the reduction of the qualifying service period for ordinary unfair dismissal claims from two years to six months. This will take effect retrospectively from 1 January 2027, meaning any employee with six months’ continuous service by that date will be protected.

The ERA 2025 also removes the statutory cap on unfair dismissal compensation (previously the lower of 12 months’ gross pay or £118,223). The basic award remains unchanged, but the risk profile for dismissals, particularly of senior or high-earning employees or those with defined benefit pension schemes, will increase significantly. The Government has reportedly committed to publishing an impact assessment before the cap is removed. The timing of the removal of the cap has not been confirmed, but we are expecting it to come into force at the same time as the change to the qualifying service period for unfair dismissal.

Zero-hours and low-hours contracts: guaranteed hours and agency workers

The ERA 2025 introduces a duty to offer guaranteed hours contracts reflecting regular hours worked over a reference period (likely 12 weeks), including for agency workers. There are also new rights to reasonable notice and pay for cancelled shifts. These measures will be phased in during 2027.

Consultation on the reference period, notice requirements, and application to agency workers is expected in 2026.

Collective redundancy: doubling of protective award and new threshold

From April 2026, the maximum protective award for failure to consult collectively will double from 90 to 180 days’ gross pay. The current trigger, 20 or more redundancies at one establishment in 90 days, remains, but the ERA 2025 allows for an additional aggregate threshold to be set by regulations (provided it is not lower than 20), which is expected to take effect in 2027.

A consultation on the alternative threshold for collective consultation is expected in 2026 (dates to be confirmed).

Fire and re-hire: narrowed ban and new automatic unfair dismissal claim

The ERA 2025 creates a set of core employment terms known as ‘restricted variations’ (currently pay, hours, holidays, pensions) which an employer cannot change through dismissal and re-engagement unless the employer can demonstrate the changes have to be made for the business to remain viable. Notably, changes to terms on workplace and duties are not included as terms subject to ‘restricted variation’. Fire and replace procedures will also be automatically unfair, subject to the same viability exception. These provisions are expected to take effect from October 2026.

Further consultation will determine which additional terms count as restricted variations and the scope of the financial viability exemption, expected in 2026.

If changes to terms and conditions are contemplated in the medium term, employers should take into account the upcoming timeline for these increased barriers to this approach.

Trade unions and industrial action: repeals and recognition changes

The Strikes (Minimum Service Levels) Act 2023 was repealed immediately on Royal Assent of the ERA 2025, with major parts of the Trade Union Act 2016 (including turnout thresholds) set to be repealed in early 2026. Dismissal on the grounds of participating in protected industrial action will become automatically unfair. The processes for union recognition, union access to the workplace and taking strike action are also streamlined under the ERA 2025.

Trade union-related consultations have recently closed and the Government’s response is awaited.

Flexible working: additional requirements for employers

Employees have had a day-one right to request flexible working since April 2024, but the ERA 2025 will bring in an additional requirement for an employer’s refusal of a request to be reasonable. The ERA 2025 maintains the current grounds for refusal, but an employer will need to clearly document that they have followed the new statutory process and explain their reasons for any refusal. This is expected to come into force in 2027.

A consultation on implementation and refusal grounds is expected in 2026.

Family-friendly rights: day-one entitlements and extended protections

From April 2026, employees will have a day-one right to statutory sick pay, paternity leave, and unpaid parental leave. Bereavement leave and enhanced pregnancy/maternity dismissal protections will follow in 2027.

A consultation on extending protections for pregnant employees and those on family leave is open until 15 January 2026 and can be accessed here.

Whistleblowing: sexual harassment disclosures protected

From April 2026, disclosures about sexual harassment will be expressly protected under whistleblowing law.

Guidance for employers and whistleblowing procedures will be subject to consultation in 2026.To prepare, employers should cross-reference their whistleblowing and equality policies and ensure staff know how to raise concerns.

Harassment: all reasonable steps and third-party liability

The existing duty on employers to prevent sexual harassment increases to taking ‘all reasonable steps’ (expected to take effect in October 2026). This will align with the existing statutory defence to vicarious liability in s.109(4) of the Equality Act 2010.

Protection from third-party harassment in relation to all protected characteristics will also be reinstated, with employer liability where all reasonable steps were not taken to prevent the harassment.

Consultation on what constitutes ‘all reasonable steps’ and enforcement mechanisms is expected in 2026.

What next?

The ERA 2025 is a wide-ranging and complex piece of legislation. Many of the headline changes will be subject to further consultation and secondary legislation, with most measures coming into force between April 2026 and 2027. Employers should be aware of the Government’s timeframe for implementation and consider responding to relevant upcoming consultations.

The practical effect of the changes brought in under the ERA 2025 is that employers will need to review and update contracts, policies and procedures impacted by the changes. Employers who may be considering making changes to structures and terms of business in the medium term should take into account the increased obligations and risks entailed in the new legislation and consider implementation timelines when planning change processes.

If you would like to discuss any aspect of this article further, please contact our Employment team on 0113 244 6100. 

You can also keep up to date by following Wrigleys Solicitors on LinkedIn.

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice, please feel free to contact Wrigleys Solicitors.