The Employment Rights Act 2025: The biggest change to UK employment law in a generation.

After just under two years of back and forth between the Houses of Commons and Lords, the Employment Rights Bill finally received Royal assent on 18 December 2025, becoming the Employment Rights Act 2025, and formally passing into law.

Why you need to start preparing

Businesses of all sizes need to understand the employment law changes ushered in by the Employment Rights Act 2025, as it affects the very core of their organisations – their workers and employees. It is important to note that new laws and legislation are set to change in tranches over the next two years, so understanding when the various changes come into effect is essential; your contracts, documentation, and policies will need to be changed/updated in line with this timeline.

Law changes include, but are not limited to:

• Unfair dismissal protection from six-months’ service.
• Restrictions on zero-hours contracts, as well as fire and rehire practices.
• Changes to family and parental leave rules, entitlements, and allowances.
• More robust harassment prevention duties.

Heightened non-compliance risks

During this time of significant change – many refer to the Employment Rights Act 2025 (ERA 2025) as the biggest change to UK employment law in more than a generation – businesses will face heightened non-compliance risks, which can be detrimental.

For instance, compensation for ordinary unfair dismissal will no longer be capped. This allows employment tribunals to award potentially unlimited sums, specific to perceived losses. In addition, the penalty for failing to compliantly consult during wide-spread redundancy proceedings now doubles to 180 days’ pay per affected employee.

As you can see, handling serious employment matters incorrectly, post-ERA, can result in serious financial and reputational consequences – far more serious than before.

So, what's changing and when?

The Employment Rights Act 2025 introduces tranche-based changes that will mostly come into effect in 2026 and 2027.

Here’s a basic roadmap of several key changes:

Unfair Dismissal Reforms (effective 1 January 2027)

Change:	The qualifying period for unfair dismissal rights reduces to six months from two years. In 2027, unfair dismissal claims will be valid from after six months’ continuous service.
Details:	The compensation cap will be removed entirely, meaning businesses that dismiss unfairly will have to compensate based on perceived losses to the employee(s) (brought forward by the presiding employment tribunal).
Next steps:	Businesses need to update: Dismissal policies. Probationary procedures. Performance management processes. Employment contracts. HR Training.

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Collective redundancy reforms

Collective consultation is a regulatory process that businesses engaging in mass redundancies (20 or more jobs at risk) will need to adhere to. It involves properly informing employees of the employer’s redundancy intentions – this process is called collective consultation.

Change:	From April 2026, businesses failing to correctly undertake collective consultation before widespread redundancy will be required to remunerate up to 180 days’ full pay per worker (this is called a Protective Award).
Details:	From 2027, collective consultation procedures will need to be undertaken if the total number of redundancies across an entire business (all sites/offices added together) reach a new threshold. However, the number that triggers the new threshold is still being decided by the Government.
Next steps:	Businesses need to update: Update redundancy processes, documentation, policies, as well as how they notify the Government of their collective redundancy plans/intentions. Retrain HR professionals on updated redundancy laws (i.e. how to correctly/legally undertake collective consultation).

Other changes for April 2026

From April 2026, there will be three significant changes to Statutory Sick Pay (SSP), Paternity Leave, and Unpaid Parental Leave.

Statutory Sick Pay (SSP):	All workers will be given the right to claim SSP from the very first day of their absence at a rate of 80% of their usual earnings, or the flat rate, whichever is lower.
Paternity Leave:	All new fathers are entitled to take up to two weeks of paternity leave from the first day of employment.
Unpaid Parental Leave:	All employees are entitled to up to 18 weeks’ unpaid parental leave per child (until the child turns 18), and this is now a day-one right with no minimum service requirement."

What you need to do

Employers will need to update payroll and HR systems to process these new SSP and leave allowances correctly. Inevitably, employee handbooks, family leave processes, employment contracts, probationary processes, and HR training materials will also need to be updated in time.

Get expert support as and when you need it

As an employer, it is vital that you stay on top of the changes ushered in by the Employment Rights Act. But, more importantly, when you update your business processes, you must ensure you do so correctly.

The Employment Rights Act 2025 introduces a wide range of additional reforms beyond those outlined here, including:

• Strengthened protections against sexual and third-party harassment (with employers required to take "all reasonable steps" to prevent it from October 2026 and will become liable for 3rd party harassment).
• The creation of a new Fair Work Agency to enforce rights (launching April 2026), significant trade union and industrial action reforms (such as enhanced union access rights, simplified recognition processes, and repeal of certain strike restrictions)
• A new statutory right to bereavement leave (expected 2027).
• Strengthened flexible working requests with tighter rules on refusals
• More detailed measures on zero-hours contracts (rights to guaranteed hours offers and shift notice/pay for cancellations, likely 2027) and fire and rehire practices (making certain dismissals automatically unfair from October 2026).