The Employment Rights Act 2025 is here: what does it mean for employers?
On 18th December 2025, the Employment Rights Bill received Royal Assent becoming the Employment Rights Act 2025. After much deliberation between the House of Commons and the House of Lords, the legislation has now been agreed in its final form, bringing with it the greatest changes to employment law in over a decade. These amendments are aimed at delivering on the government’s ‘Plan to Make Work Pay’ and are intended to clarify employers’ obligations while strengthening certain worker protections. The changes will be implemented over a phased two-year period across 2026 and 2027.
What are the key changes introduced by the Employment Rights 2025 Act?
Unfair Dismissal
Under the Act, employees will have the right to claim unfair dismissal after six months of employment (which currently only accrues after two-years of service). The existing compensation cap for unfair dismissal (lower of 52 weeks’ pay or £118,223) will also be removed in its entirety meaning that there will be no limit on the amount that can awarded. It is anticipated to result in increased and more costly claims, and employers will need to reconsider their approach to recruitment, performance management and termination processes, with greater emphasis on assessing performance during probation periods – the first six months will undoubtably become pivotal.
Harassment
An employers existing duty to take ‘reasonable steps’ to prevent sexual harassment in the workplace will be extended to a duty to take ‘all reasonable steps’, and more notably, employer liability will also extend to any harassment by third parties, with employers having a duty to take ‘all’ reasonable steps to prevent third-party harassment. Where the duty is breached, tribunals can uplift the employees’ discrimination compensation by up to 25% with the EHRC having the power to investigate and take enforcement action. The change does not create a free-standing claim but will apply to any existing harassment claims.
Harassment (including sexual harassment) will also be considered a protected disclosure under whistleblowing legislation, and NDAs and confidentiality terms will likely be unenforceable in such contexts. This certainly places a greater onerous on employers in their obligation to prevent harassment, and anti-harassment policies and procedures will need reconsideration, along with a comprehensive review of external risks and the implementation of safeguards beyond the direct workforce.
Zero/Low/Irregular Hours Workers
While zero-hours contracts are not being abolished, zero/low-hours or casual workers whose hours regularly exceed the zero/minimum hours, over a 12-week reference period, will have the right to be offered a contract reflecting those regular hours. The Act also provides enhanced rights relating to notice of shifts, notice of cancellations or changes and provides a right to compensation for shifts which are cancelled or curtailed at short notice in the form of a set payment. These rights will also apply to agency workers.
This is part of the government pledge to avoid ‘exploitation’ and naturally affords greater protection to workers. Employers who rely on casual, zero-hours or agency workers will need to review their arrangements to assess the potential impact, implement systems to track hours and proactively manage cancellations to avoid compensation claims. The threshold for the minimum hours, notice periods and cancellation payments will be subject to further consultation.
Collective Redundancy
The current threshold to consult in collective redundancy (20 or more redundancies within a 90-day period at a single site) will remain, but a new additional threshold based on the number of redundancies across the entire organisation will be introduced.
The maximum protective award for the failure to consult in collective redundancy will also double from 90 days’ pay to 180 days’ pay per affected employee.
The new organisational threshold is yet to be determined but will expectedly result in the obligation to collectively consultation being trigged more easily and more frequently, with greater cost implications if provisions are breached. Employers will need to coordinate and track redundancies across the entire organisation and consider strengthening redundancy planning.
Fire and Rehire
In most circumstances, it will become automatically unfair to dismiss an employee for refusing a contractual variation of a particular kind. This includes changes in pay, pension, hours of work and holiday entitlement. There are narrow justifications where such a dismissal would not be automatically unfair and these include where the change is required to prevent financial difficulties or to maintain the employer as a going concern. For public sector employers in particular, this justification will be difficult to make out.
This change will unequivocally reduce the flexibility for contract variation, impose a higher threshold for justification, and will of course require careful consideration.
Flexible Working
Although flexible working will not become ‘the default’ position for all workers, any refusal of flexible working must now be ‘reasonable’. Whilst further clarification as to what will be considered ‘reasonable’ is expected, employers will be subject to a higher threshold for justifying refusals and it may lead to tribunals applying greater scrutiny on decisions.
Family Rights
Paternity leave and unpaid parental leave will become ‘day one’ rights. The current qualifying period for paternity leave (26 weeks) and unpaid parental leave (1 year) will be abolished meaning that these rights will be available from day one of employment. The Act will also strengthen protection against dismissal for employees who are pregnant, and those taking or returning from a period of statutory family leave with dismissal of employees during pregnancy, maternity, sharded parental leave, or within 6 months of return to work, becoming unlawful, except in limited circumstances. Parental bereavement leave will also be extended to cover wider family bereavement. Employers will of course need to review and update family leave polices accordingly.
Statutory Sick Pay
Statutory sick pay will also become a ‘day one’ right. The exiting 3 day waiting period for statutory sick pay will be removed, and the current earnings threshold will be replaced with a requirement that statutory sick pay is paid at 80% of average earnings for those earning below the standard statutory sick pay rate. This will bring with it greater cost implications and a thorough review of contractual provisions on statutory sick pay, financial planning and diligent record-keeping should be considered.
Employment Tribunals
The limitation period for employees to bring a claim will be extended from 3 to 6 months which will inevitably open the door for an increased number of claims, although it may conversely result in fewer claims if employees are afforded a greater period for reflection and to enter early dispute resolution. It is nevertheless clear that employers will need to review retention policies, consider alternative dispute resolution mechanisms and be ‘litigation ready’.
Industrial Relations – Trade Union Activity
Notice of industrial action will reduce from 14 days to 10 days, and ballot mandates will extend from 6 to 12 months. There will be new rights for unions to access workplaces and a simplified recognition process, including removal of the 40% support threshold. The Strikes (Minimum Service Levels) Act 2023 will be repealed and dismissal for taking part in industrial action will also become automatically unfair. A comprehensive review of current employee and trade union relations, industrial action procedures and dispute resolution frameworks will inevitably be required.
Enforcement – Fair Work Agency
A new consolidated body, the ‘Fair Work Agency’ will be created to regulate and enforce workers’ rights collectively. It will combine several functions of existing agencies and enforce rights including statutory sick pay, holiday pay, national minimum wage, as well as initiating claims and issuing penalties. The definition of ‘agencies’ is also expected to be expanded to include ‘umbrella companies’ which will allow regulation and enforcement by the ‘Fair Work Agency’. This will strengthen the accessibility and enforceability of workplace rights and employers should consider compliance audits and robust record-keeping to ensure that they are ‘inspection ready’.
What should employers do now?
Plan for change – the Employment Rights Act 2025 is undoubtably one of the most significant changes in employment law we have encountered to date, marking a fundamental shift in employer obligations. For employers, it presents both obstacles and opportunities. Whilst it undisputedly imposes expanded statutory obligations and heightened compliance measures requiring rigorous governance and comprehensive policy reform, it also provides an opportunity to strengthen and modernise workforce planning and transparency, advance equality and enhance inclusive employment practices.
Although most reforms will not apply immediately and will be phased in from April 2026, with many areas being subject to further consultation and secondary legislation, employers should ensure that they are familiar with the proposed changes and prepare to proactively review and update relevant policies, contracts, processes, systems, record-keeping and undertake financial impact assessments. It would also be helpful to implement training on the new rights and enforcement, as well as informing employees of the new changes under the Act to aid an orderly transition. Our dedicated team of employment lawyers are here to help, and we will provide further substantive updates as developments progress.