A practical guide for business owners and HR teams
The Employment Rights Act 2025 presents the most significant shift in UK workplace protections in a decade. With earlier unfair dismissal protection, expanded leave rights and increased trade union protections, employers face greater compliance obligations and litigation risk.
Although implementation is phased, preparation is the key to minimising disruption and cost. This guide sets out the key changes and practical steps employers should be taking now.
1. Unfair dismissal
Reduced Qualifying Period
The qualifying period for unfair dismissal claims is being reduced from two years to six months. Though this change will only be implemented from 1st January 2027, it means all employees hired before 1st July 2026 will gain protection from that date. Therefore, recruitment decisions made now carry longer-term risks and employers should mitigate this from the outset of employment.
Action Points for Employers:
- Structure and actively manage probation periods
- Set clear, written performance expectations from day one
- Document performance concerns and informal discussions
- Ensure dismissal decisions are procedurally fair, even during probation
- Train managers in early-stage performance management and risk awareness
2. Changes to Zero-Hours and Low-Hours Contracts
From 2027, workers who regularly work consistent hours may be entitled to guaranteed hours reflecting their actual working patterns. Employers must also comply with stricter shift notice and cancellation requirements.
Action Points for Employers:
- Employers using agency or outsourced staffing models should audit contracts and working arrangements
- Ensure contracts reflect actual working practices and how the business is currently operating
- Consider implementing fixed term contracts or annualising hours where appropriate
- Implement clear, documented shift notification systems
- Update scheduling and payroll systems to demonstrate compliance
3. Trade Union Reforms
From 18th February 2026, protections relating to industrial action have been strengthened, with dismissal for participation becoming automatically unfair and the notice period for taking industrial action being reduced from 14 days to 10 days in certain sectors, along with several other changes.
Action Points for Employers:
- Engage proactively with recognised trade unions and maintain healthy, constructive dialogue
- Strengthen employee engagement forums to enable effective discussions with employees and unions and prevent escalation of concerns
- Train managers to identify and escalate collective concerns early, to give businesses time to prepare should industrial action occur
4. Fire and Rehire Principles
Stricter fire and rehire provisions will apply from January 2027 and dismissing employees who refuse contractual changes, involving ‘restricted variations’ to core terms, will be automatically unfair. Employers may still make changes with employee consent following consultation or rely on contractual flexibility clauses; however, t ribunals will scrutinise consultation processes and business rationale carefully.
Action Points for Employers:
- Audit variation clauses in employment contracts, as introducing new or wider clauses that cover restricted variations after January 2027 could also trigger automatic unfair dismissal
- Build sufficient time into project planning for meaningful engagement with affected employees and relevant trade unions
- Engage transparently and, where appropriate, offer reciprocal benefits
5. Statutory Sick Pay Reform
From 6th April 2026, statutory sick pay will become payable from the first day of absence, with expanded eligibility.
Action Points for Employers:
- Update sickness absence policies to clearly explain reporting procedures, evidence requirements and how absence will be managed in a fair and supportive manner
- Train managers on eligibility and reporting requirements
- Ensure payroll systems reflect day-one entitlement
6. Third Party Harassment Duties
Beginning in October 2026, employers will be required to proactively take all reasonable measures to safeguard employees from harassment related to any protected characteristic by customers, clients or other third parties.
Action Points for Employers:
- Ensure anti-harassment policies are clear, with explicit reference to third parties
- Deliver periodic, practical and recorded training for managers and other employees
- Implement effective and confidential reporting mechanisms
- Proactively identify risks, especially in public-facing roles
- Reinforce expectations about behaviour through policies, posters, and appraisal meetings
7. Expanded Day-One Family and Bereavement Rights
From 6th April 2026 and continuing with implementation of certain elements into 2027, paternity, adoption and bereavement leave will become available from the start of employment.
Action Points for Employers:
- Update family leave policies
- Prepare for sudden bereavement leave by planning contingencies to distribute workloads, meet client needs and maintain project deadlines
- Ensure managers are trained to handle requests sensitively and consistently
8. Increased Litigation Risk and Compliance Exposure
Beyond individual reforms, the Employment Rights Act 2025 will significantly increase overall tribunal exposure.
The time limit for most Employment Tribunal claims will be extended from three to six months in October 2026, increasing the window for potential claims. In addition, the removal of the statutory compensation cap for unfair dismissal is likely to increase claim values significantly, particularly for high earners who can now also claim loss of bonuses or commission.
Action Points for Employers:
- Strengthen documentation and record retention policies
- Audit dismissal, grievance, and performance management processes
- Reassess employment tribunal insurance cover
- Update financial forecasting and contingency planning
Employers who have their contracts and policies reviewed and updated, strengthen documentation and invest in manager training now will be far better placed to manage the increased compliance burden and mitigate the risk of costly claims.
We Can Help
If you are a business owner employing staff and require legal support with any of these areas, then please contact the Corporate & Commercial Department on 01244 312306 or at law@oliverandco.co.uk.
