Employment Rights Act 2025 – what charity leaders need to know

In our recent webinar on the ERA 2025, charity expert Carla Whalen, Partner at Russell Cooke, focused on some of the key changes that charity leaders need to know to inform their charities’ policies, practices, and budgets.

One of the most impactful changes for charities is the reduction of the qualifying period for unfair dismissal claims. From January 2027, the period drops from two years to just six months. Crucially, the statutory cap on compensation for unfair dismissal has been removed, meaning successful claims could result in significantly higher financial penalties for employers. To manage this risk, boards should review probationary periods; if a standard probation is currently six months, it may need to be shortened to 3–4 months to allow for a performance assessment before full rights kick in.

Statutory Sick Pay (SSP) and family leave also see immediate changes. From 6 April 2026, SSP is payable from the first day of sickness, removing the previous three-day waiting period. The lower earnings limit for SSP eligibility has also been removed; however, the rate is now capped at 80% of an employee’s normal weekly earnings if that is lower than the prescribed weekly rate. Furthermore, parental leave (unpaid) and paternity leave have become ‘day-one’ rights, meaning no minimum service is required.

The Act also introduces a new concept of ‘restricted variations’ to prevent ‘fire and rehire’ practices. Employers will be barred from forcing contract changes – specifically regarding pay, pensions, hours, and working times, and holidays and time off – by dismissing and re-engaging staff. These changes are considered automatic unfair dismissals unless the charity can prove it is in dire financial straits, such as teetering on insolvency.

Many charities rely on zero-hours, sessional or agency workers. By 2027, employers will have a duty to offer guaranteed hours to any worker who has worked regularly over a specified reference period. The length of this period remains to be confirmed but could potentially be 12 weeks or even a year. There is no obligation for the worker to accept, but the offer must be made. Notably, if a charity uses an agency worker regularly, the hirer (the charity) may be required to offer them a direct contract with guaranteed hours, which could disrupt traditional agency models.

Charities must also prepare for a higher standard of protection regarding harassment. Expected by October 2026, employers will have a duty to take all reasonable steps (rather than just ‘reasonable steps’) to prevent sexual harassment. This includes liability for third-party harassment, such as a service user harassing a staff member. This is a high-risk area for charities operating drop-in centres, care facilities, or advice services where staff have frequent face-to-face contact with the public. Failure to comply can result in an employment tribunal increasing compensation awards by up to 25%. Whistleblowing protections have also been expanded to explicitly include disclosures regarding sexual harassment. These protections allow employees to report concerns directly to the employer or the a ‘prescribed person’ (defined in legislation), which includes the Charity Commission.

To prepare for these changes, charity leaders should take the following steps:

• Audit contracts and policies: review current employment contracts for ‘implied’ terms, such as those found in staff handbooks or agreed-upon verbally. It is advisable to include ‘entire agreement’ and ‘no oral variation’ clauses now to prevent accidental contractual changes.
• Update financial forecasts: finance leaders must budget for increased costs related to day-one SSP, guaranteed hours for agency or bank workers, and potential redundancy awards.
• Managerial training: managers need training to effectively assess performance within the new six-month window for unfair dismissal. They must also be trained on the higher ‘all reasonable steps’ threshold for preventing harassment to provide a legal defence for the organisation.
• Review engagement models: if your charity uses sessional workers for grant-funded projects, discuss the new guaranteed hours rules with funders. If project funding drops, you may no longer be able to simply stop offering shifts to regular workers who have earned guaranteed contracts.
• Prepare for trade union requests: simplified procedures for union recognition are already in force. Even smaller charities are seeing an uptick in voluntary recognition requests as staff seek job security.

By planning for the changes now and tightening performance management and harassment protocols, charity trustees can mitigate the increased legal and financial risks posed by these reforms.

• Watch the webinar recording ‘Employment Rights Act 2025: What charities need to know’ to learn more about the changes introduced by the Act