The Employment Rights Act 2025 received Royal Assent on 18 December 2025. Some measures are already in place, while most provisions will be delivered in phases through 2026 and 2027. This timeline creates a practical window for employers to review and update their policies. Without proper preparation, these changes will have material business implications.
Here is what has changed, what will change and when those changes are planned to take effect, and what employers should consider doing in response.
The Changes That Matter Most
Unfair dismissal qualifying period: reduction to six months (2027)
Currently, employees must have two years of service to claim unfair dismissal. From January 2027, this will reduce to six months, subject to confirmation. Employees hired from mid-2026 onwards will gain protection at the six-month mark.
This does not mean dismissals become impossible. It means you should demonstrate fair procedures from the outset. Unclear expectations, poor documentation, and hasty dismissals are more likely to result in claims and expense.
The statutory cap on compensation will also be removed. From 2027, this cap will no longer apply. Generally it’s expected that this means that the cap will not apply to dismissals which occur in January 27 or later but it’s unclear how this will be implemented and it could be applied to when cases are heard by the tribunals. For employers, financial exposure from unfair dismissal claims will be more difficult to predict and potentially significant.
Fire and rehire: automatic unfairness (2027)
The Act will introduce protections where an employer dismisses an employee for refusing significant contract changes. Changes to pay, hours, shift patterns, or shift length are considered “restricted variations”. From 2027, dismissal for refusing such a variation will be automatically unfair unless the employer can demonstrate extreme financial difficulty.
If you are considering restructuring, proper consultation and documentation become increasingly important. Unilateral contract changes are no longer a straightforward cost-saving approach.
Sexual harassment duties: strengthened to “all reasonable steps” (October 2026)
From October 2026, the standard for preventing sexual harassment will move from “reasonable steps” to “all reasonable steps”. The Act will also extend employer liability to cover third-party harassment.
Since 6 April 2026 , employees who report sexual harassment have had explicit legal protection under whistleblowing laws.
Statutory Sick Pay: improved in April 2026
In April 2026, the Lower Earnings Limit and the 3 day waiting period were removed. This significantly broadens access to statutory sick pay. More workers will qualify, and statutory sick pay will be payable from the first day of absence, rather than only for periods of leave which lasted 4 days or longer. For employers, this means expanded sick pay obligations and higher payroll costs during periods of employee absence.
Paternity Leave: available from Day 1 (April 2026)
In 6 April 2026, paternity leave became a day-one right. Employees can now take paternity leave from their first day of employment, removing the previous 26-week qualifying period. This applies immediately to all new hires from that date onwards.
Annual leave and holiday pay: documentation requirement (April 2026)
Since April 2026, you must keep records demonstrating compliance with annual leave obligations. If you currently track leave through informal systems, implement documented processes now. Enforcement bodies will expect to see clear records.
Collective redundancy: penalties increase to 180 days’ pay (April 2026)
Since April 2026, the maximum protective award for failing to consult on collective redundancies doubled. If you are proposing to make 20 or more employees redundant at one site within 90 days without proper consultation, the financial consequence will be substantial.
Trade union and industrial action rules: changes now in place and phased
The Strikes (Minimum Service Levels) Act 2023 has been repealed. The great majority of the Trade Union Act 2016 has been repealed. Dismissing an employee for taking part in protected industrial action is now automatically unfair. These changes affect employers in unionised sectors, particularly transport, utilities, public services, and social care.
New enforcement: Fair Work Agency was launched in April 2026
The Fair Work Agency was launched on 7th April 2026, consolidating employment enforcement functions. It has authority to investigate breaches of minimum wage, statutory sick pay, and holiday pay. It can bring cases on behalf of workers without waiting for individual complaints. Compliance will increasingly be a matter of active monitoring.
Other provisions: coming 2027
Examples include: Statutory bereavement leave is due to be extended. Enhanced protections for pregnant workers are planned. Zero hours contract reforms are expected to come into force. Exact timescales for these provisions are subject to government confirmation.
Why This Matters Now
Preparation takes time. Reviewing policies, updating procedures, training managers, and auditing compliance cannot be rushed. The practical window is now through to late 2026.
For employers, the financial and operational impact of these changes is material. Defending an unfair dismissal claim is costly. Losing a claim can be considerably more expensive without the compensation cap. Risk management in this area warrants early attention.
Enforcement is changing, compliance is now both a legal and a practical business management issue.
These changes introduce a number of foreseeable risks for employers. They have known timescales and specific business implications.
What You Need to Do
Now (May 2026 onwards)
The April 2026 changes are now in effect.
- Ensure your statutory sick pay procedures comply with the new rules (no waiting period, no lower earnings limit).
- Your annual leave and holiday pay records must be documented and auditable.
- The Fair Work Agency is now operational, monitor their enforcement guidance regularly.
June through September 2026
- Update your settlement and claims procedures for the extended tribunal time limits (6 months).
- Your harassment and discrimination policies must reflect the “all reasonable steps” standard
- If you operate in unionised sectors, ensure your industrial relations processes reflect the current trade union protections.
- Conduct a risk audit with employment law solicitors to identify gaps in your current compliance.
October 2026 through December 2026
Prepare for the 2027 changes.
- Strengthen your recruitment, probation, and dismissal procedures in anticipation of the six-month unfair dismissal qualifying period and removal of the compensation cap. Document all decision-making carefully.
- If restructuring is planned for 2027, involve employment law solicitors at the planning stage now. Assess your financial exposure to unfair dismissal claims without the compensation cap.
- Consider employment law indemnity insurance.
Proper planning now prevents costly disruption in 2027.
FAQs
Does the Employment Rights Act mean we have to rewrite all our employment contracts?
Review them for probation clauses, flexibility provisions, and confidentiality language. Update templates for new hires. Amending existing contracts for current staff is usually unnecessary.
We dismissed someone earlier this year. Are we at risk under the new Employment Rights Act legislation?
Employment law is not retrospective. The law in force when you dismissed will be relevant to that dismissal.
We are planning restructuring in late 2026. What should we do in light of the Employment Rights Act?
If dismissals take effect from 1 January 2027, you will be operating under the new regime: six-month qualifying period and no compensation cap so consider the timing of your planned restructure carefully. Involve employment law solicitors now at the planning stage. Document every decision carefully and consult affected employees thoroughly. Procedural failings will be significantly more costly to defend.
Under the Employment Rights Act what does “all reasonable steps” to prevent harassment mean?
It means much more than simply having clear written policies, you need to be making sure that what is set out in your policy is actually happening in practice via accessible reporting mechanisms, prompt investigation, documented outcomes, and practical measures to prevent third-party harassment. Government guidance is expected mid-2026, EHRC has already issued helpful guidance.
Are employment law solicitors only needed if something goes wrong?
Advice from employment law solicitors is far more valuable before problems arise. Preventative work is considerably less costly than defending disputes.
What Happens When Things Go Wrong
Collective redundancy failures now incur substantial penalties and unfair dismissal claims are costlier to defend, with unlimited compensation from 2027. Harassment breaches trigger tribunal claims and unlimited liability and now include the actions of third parties such as your customers towards your staff. . The Fair Work Agency proactively investigates holiday pay breaches without waiting for complaints. Procedural errors are expensive to defend and difficult to settle favourably.
How JPP Law Can Help
Employment law is no longer a compliance checkbox. It is a material business risk factor. A startup scaling fast has different considerations than an established business restructuring. A unionised organisation operates in a different legal context.
JPP Law advises employers across England and Wales on employment matters. Our employment law solicitors for employers work with HR Directors, Founders, and Finance Directors to assess how these changes affect your situation and develop practical compliance strategies.
We can audit your policies, identify specific risks, advise on restructuring and contract matters, and train your management team. We work transparently and you only pay for agreed services.
If you would like to discuss how these changes will affect your organisation, our employment law solicitors would be happy to assist. Contact JPP Law to arrange a consultation.
