The Employment Rights Act 2025
The “Plan to Make Work Pay”
The Employment Rights Act 2025 represents one of the most wide-ranging reforms of UK employment law in decades. It forms a central part of the Government’s wider Plan to Make Work Pay.
The Act received Royal Assent on 16 December 2025. While it introduces significant new rights and obligations, many of its provisions will not take effect immediately and will instead be implemented through secondary legislation over the next two years. Most of the Act applies across England, Scotland and Wales, but not Northern Ireland.
What is already clear is that employers will need to plan carefully for a period of sustained change. Below, we outline the key reforms, their anticipated timing, and the practical issues employers should be considering now.
Unfair Dismissal
A shorter qualifying period
One of the most significant changes is the reduction in the qualifying period for unfair dismissal claims. The Government accepted a House of Lords amendment reducing the qualifying period from two years to six months’ continuous service.
The Government has committed to this change taking effect from 1 January 2027. From that date, any employee with six months’ service will be able to bring a claim of unfair dismissal claim, substantially increasing the number of employees with statutory protection.
Removal of the compensation cap
The Act also removes the existing limits on compensation for unfair dismissal. Currently, compensatory awards are capped at the lower of 52 weeks’ gross pay or a statutory maximum (currently £118,223 and uprated annually). Both caps will be abolished.
At the moment, it is likely that these changes will come into force at the same time as the new qualifying period in January 2027. The removal of the cap is a major shift, making disputes harder to settle and senior exits more challenging to manage.
Family Leave, Sick Pay and Other Day One Rights
The Act significantly expands day one employment rights, including statutory sick pay, paternity leave and unpaid parental leave. Statutory sick pay will be available from day one, with no earnings threshold, and will be set at 80% of earnings for lower-paid workers. These changes are expected to take effect from April 2026.
New rights to bereavement leave, including for pregnancy loss before 24 weeks, are also proposed, subject to consultation.
Restrictions on “Fire and Rehire” and “Fire and Replace”
A near-ban on dismissals to impose new terms
The Act significantly restricts employers’ ability to dismiss employees in order to impose changes to terms and conditions. Dismissals for this purpose will be automatically unfair where they relate to key contractual terms such as pay, working hours, pension arrangements, shift patterns, time off rights and other terms to be defined in regulations.
The ban also applies where an employer dismisses an employee with the intention of hiring another person on varied terms to perform substantially the same role. In addition, dismissals designed to introduce new flexibility clauses covering these protected terms will also be caught.
Limited exception for genuine financial distress
There is a narrowly drawn exception where an employer is facing financial difficulties that threaten its ability to continue as a going concern, and the changes could not reasonably have been avoided. This is likely to be interpreted strictly and will require clear evidence.
Extension to “fire and replace”
The restrictions also apply where employees are dismissed and replaced with non-employees, such as self-employed contractors or agency workers, to perform substantially the same work. These dismissals will also be automatically unfair unless the employer can show genuine financial collapse.
Transfers under TUPE and dismissals wholly or mainly due to a reduction in work are excluded, but the overall effect will be to significantly limit employers’ ability to force through contractual changes. These reforms are expected to take effect in October 2026.
Collective Redundancy Consultation
The Act introduces a new, additional trigger for collective redundancy consultation. In future, consultation will be required not only where there are 20 or more redundancies at one establishment, but also where a new business-wide threshold is met.
The precise test will be defined in regulations, but it is expected to involve including redundancies across all sites, and may be based on a percentage or overall number of employees. Employers will therefore need systems capable of tracking redundancies across the entire organisation, not just at individual locations.
The Act also doubles the maximum protective award for failure to inform and consult properly, increasing it to 180 days’ pay. This significantly raises the financial risk of non-compliance. These changes are expected to take effect from April 2026.
Zero Hours Contracts
Guaranteed hours offers
The Act does not ban zero hours contracts but does introduce a new right for zero or low-hours workers to be offered a contract reflecting the hours they regularly work over a reference period. This duty will apply on an ongoing basis while the worker continues to meet the qualifying criteria and will also apply to agency workers.
The length of the reference period and the definition of low hours and other details, will be set out in secondary legislation. Consultation is expected in early 2026, with the measures coming into force in 2027.
Notice of shifts and compensation for cancellation
Workers without set working patterns will also get the right to reasonable notice of shifts and reasonable notice of any changes or cancellations, together with proportionate compensation. Again, the detail will be developed through consultation and regulations, with implementation expected in 2027.
Flexible Working
The Act strengthens the existing right to request flexible working. While the statutory business reasons for refusal remain unchanged, employers will be required to show that any refusal is reasonable in the circumstances, explain the reasons clearly, and consult with the employee before refusing a request.
Although the penalties remain unchanged, employers will need to review their policies and ensure managers are properly trained to handle requests. These changes are likely to come into effect in 2027.
Equality, Pay Transparency and Action Plans
Equality action plans
The new rules will require employers with 250 or more employees to publish equality action plans, including gender pay gap action plans. The Government also intends to require publication of ethnicity and disability pay gap data.
These plans may be introduced on a voluntary basis from April 2026, before becoming mandatory in 2027. The detail, including penalties for non-compliance, will be set out in regulations following consultation.
Menopause action plans
Large employers will also be required to publish menopause action plans as part of their wider equality action planning. As with other equality measures, voluntary adoption is expected in April 2026, with mandatory compliance from 2027.
Harassment, Whistleblowing and NDAs
A stronger duty to prevent harassment
Employers will be required to take “all reasonable steps” to prevent workplace harassment. The Government will have the power to define what constitutes reasonable steps in regulations. These measures are expected to take effect in October 2026.
Liability for third-party harassment
Employers will also be liable for harassment by third parties, unless they can show they took all reasonable steps to prevent it. This applies to all forms of harassment and is also expected to take effect in October 2026.
Whistleblowing protection
Disclosures relating to sexual harassment will be expressly included within the list of qualifying disclosures for whistleblowing purposes, provided the public interest test is met. These changes are expected to take effect in April 2026.
Limits on non-disclosure agreements
The Act renders void any agreement that seeks to prevent a worker from making allegations and or disclosures about harassment or discrimination, including the employer’s handling of such matters. Regulations may introduce limited exceptions, but the timing of these provisions is currently unclear.
For more about Gagging clauses, visit:
Tribunal Claims and Enforcement
Extended time limits
The time limit for bringing Employment Tribunal claims will be extended from three to six months for all types of claims, including unfair dismissal and discrimination. This change is expected in October 2026.
A new Fair Work Agency
The Act establishes a new Fair Work Agency, consolidating enforcement functions currently spread across multiple bodies. The Agency will have wide powers to investigate, enter premises, require information, enforce holiday pay and statutory sick pay, and recover unpaid tribunal awards.
What Employers Should Be Doing Now
Although many of these reforms will not take effect immediately, employers should be reviewing contracts, policies, consultation processes and management training.
The Employment Rights Act 2025 marks a decisive shift towards greater employee protection, increased procedural obligations and enhanced enforcement. Early preparation is essential.
If you would need advice in respect of any of the above, please contact Nighat Sahi and our employment team.
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