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The UK Employment Rights Act 2025 (the “ERA 2025”) has now received Royal Assent.
United Kingdom
Employment and HR
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The UK Employment Rights Act 2025 (the “ERA
2025”) has now received Royal Assent. The ERA 2025
will introduce the most significant changes to UK employment law in
over a decade. The reforms will affect all organisations with UK
staff and will require changes to employment documentation,
policies, and processes in the coming months.
The key changes and the practical steps employers should
consider are as follows:
Unfair dismissal risk and compensation
The qualifying period for unfair dismissal will reduce from two
years to six months. This will significantly affect how employers
manage exits for newer employees. Employers will need to revisit
the use of probationary periods, performance management and notice
periods for new hires.
The current cap on unfair dismissal compensation will be
removed. This will increase potential exposure, particularly for
senior employees and high earners.
Earlier and “day one” rights
There will be new day one rights to paternity leave and unpaid
parental leave, and expanded bereavement leave.
Statutory sick pay will become payable from day one of absence
and without the current lower earnings limit.
These changes will widen eligibility across workforces (notably
for junior and support staff).
Pregnancy and maternity rights
Protections against dismissal for pregnant workers and those
individuals who have returned from maternity leave will be
strengthened. Employers will need to review their redundancy
selection processes, dismissal decision-making and manager
training, given the overlap with discrimination risk.
Contract change, “fire and rehire” and working
patterns
There will be new statutory restrictions on the use of
“fire and rehire” to impose contractual changes. This
will increase the risk profile for changes to compensation
structures, bonus terms and benefits. Employers will need longer
lead times, clearer business justifications and more structured
consultation.
There will be stronger protections for zero-hours and other
“one-sided flexibility” arrangements, including a right
to request a more predictable working pattern. This is likely to be
a key issue for sectors using casual and gig-type
arrangements.
Collective redundancies
The trigger for collective consultation will be linked to the
employing entity only, rather than to “one establishment”
of that entity (broadly each workplace). This means that where an
employing entity proposes to make 20 or more redundancies in a 90
day period, a collective redundancy consultation process will be
required regardless of how those redundancies are distributed
across sites.
The maximum protective award for failure to collectively
consult will double from 90 days to 180 days’ pay.
Groups with multiple UK sites under a single employing entity
will be particularly affected.
Flexible working
Where a flexible working request is rejected, the employer will
need to provide the reason for the rejection and explain why the
refusal was reasonable. However, the maximum award for failing to
follow the statutory procedure will remain capped at 8 weeks’
pay.
Culture, harassment and enforcement
Employer will have a new proactive duty to take
“all reasonable steps” to prevent sexual
harassment (including by third parties). The scope of this duty is
subject to further guidance. Sexual harassment disclosures will
also receive whistleblowing protection.
A new Fair Work Agency will be created to coordinate the
enforcement of certain employment rights (e.g. National Minimum
wage and holiday pay), including providing investigation
powers.
Time limits to bring claims
The current time limit to bring most claims in the Employment
Tribunal is 3 months. This will be extended to 6 months.
Timeline and next steps
Implementation will be phased from 2025 through to 2027. Many of
the most material changes for employers are expected from Q3 2026
onwards. Changes to unfair dismissal are not expected to take
effect until January 2027. Further secondary legislation and
guidance is expected during 2026, including detail on how the new
duties and restrictions will operate in practice.
As we move into 2026, and as the detail of the ERA 2025 is
clarified through further legislation and guidance, employers
should start to identify and plan for potential changes in key
areas such as:
Updates to employment contracts, handbooks and key HR policies
(including sickness, family leave, flexible working, harassment and
whistleblowing);
Updates to or implementation of workplace conduct
training;
Updates to contractual documentation with respect to third
parties (notably with respect to protections for
harassment/whistleblowing); and
Updates policies and procedures in relation to recruitment,
probation and performance management.
Early scoping and planning will help ensure your organisation is
ready to move quickly once guidance is finalised and ahead of the
relevant implementation dates.
UK Employment Rights Act 2025: Major Reforms for
UK Employment Law
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.