Employment Rights Act 2025
The Employment Rights Act 2025 is a major shift in UK employment law, writes Chris Macwilliam – Head of Employment at Clough & Willis
On 18 December 2025, the Employment Rights Bill received Royal Assent and became the Employment Rights Act 2025 (ERA 2025). The government has described it as the biggest overhaul of workers’ rights in a generation, and it sits at the centre of the Labour government’s Make Work Pay agenda.
The Act introduces wide-ranging changes across many areas of employment law, including unfair dismissal, zero-hours contracts, flexible working, trade union rights and workplace harassment. Because of the scale of the reforms, the changes will be introduced in stages, with key provisions coming into force between April 2026 and 2027.
Unfair dismissal reforms
One of the most significant changes relates to unfair dismissal. At the moment, employees must have two years’ service before they can bring an ordinary unfair dismissal claim. Under the new law, this qualifying period will reduce to six months for dismissals taking place on or after 1 January 2027.
The Act will also remove the statutory cap on compensation for unfair dismissal from 1st January 2027. Previously, compensation was limited to the lower of 12 months’ gross pay or a fixed annual cap. Removing that limit could significantly increase the potential cost of claims, particularly where higher-paid employees are involved. The basic award will remain unchanged.
Guaranteed hours for zero-hours workers
The ERA 2025 also aims to address concerns about one-sided flexibility in the labour market. Workers on zero-hours or low-hours contracts will gain new rights designed to provide greater stability.
After a set reference period, employers will need to offer qualifying workers a contract reflecting the hours they have regularly worked. Workers will also gain the right to reasonable notice of shifts and compensation where shifts are cancelled, moved or shortened at short notice.
These measures are intended to give workers greater predictability in their working patterns and income. They are expected to come into force in 2027.
Restrictions on ‘fire and rehire’
The practice commonly known as ‘fire and rehire’, where employees are dismissed and offered new contracts on worse terms, will face major restrictions from January 2027.
In most cases, dismissing employees in order to impose worse contractual terms will amount to automatic unfair dismissal. The rules apply to key terms such as pay, hours, holiday and pensions.
There will be a limited exception where an employer can show genuine financial difficulty and demonstrate that the changes were necessary to keep the business operating. The protections will also cover so-called “fire and replace” situations, where employees are dismissed and replaced by agency workers or contractors doing substantially the same job.
Day-one employment rights
From 6 April 2026, several employment rights will become available from the first day of employment.
The three-day waiting period for Statutory Sick Pay will be removed, meaning SSP will be payable from day one of sickness absence. The lower earnings limit, which previously excluded some lower-paid workers from SSP, will also be removed, although further regulations are still needed before this change takes effect.
Paternity leave and unpaid parental leave will also become day-one rights.
Bereavement leave
The Act introduces a new right to unpaid bereavement leave, including in cases of pregnancy loss before 24 weeks. These changes are expected to take effect in 2027.
From 6th April 2026, it will also allow a bereaved partner to take up to 52 weeks of paternity leave if the mother or primary adopter dies within the first year of a child’s life.
Flexible working changes
Flexible working rights will also be strengthened. From 2027, employers will need to show that any refusal of a flexible working request is objectively reasonable.
The government is currently consulting on a proposed process employers will be expected to follow when declining requests, with the aim of encouraging more open and transparent discussions about flexible working.
Stronger harassment protections
The Act strengthens employers’ duties to prevent sexual harassment in the workplace. Employers will be required to take “all reasonable steps” to prevent harassment, raising the standard from the current requirement to take “reasonable steps”. This will come into effect in October 2026. Protection against harassment by third parties, such as clients or customers, will be extended at the same time.
Non-disclosure agreements
The ERA 2025 will also limit the use of confidentiality clauses that prevent workers from speaking about discrimination or harassment. Most clauses that attempt to prevent such disclosures will become unenforceable, although some limited exceptions are expected in further legislation.
Employers may therefore need to review their settlement agreement templates and internal processes for resolving these types of claims.
Collective redundancy penalties
From 6 April 2026, the maximum protective award for failing to properly consult during a collective redundancy process will double from 90 days’ pay to 180 days’ pay.
This significantly increases the potential cost of failing to meet consultation obligations when proposing large-scale redundancies.
Trade union and industrial action reforms
The Act also makes a number of changes to trade union law and industrial action rules. The Strikes (Minimum Service Levels) Act 2023 was repealed when the ERA 2025 received Royal Assent.
Further reforms introduced in February 2026 include changes to industrial action ballot rules, a reduction in the notice period for industrial action from 14 days to 10 days, and an extension of the ballot mandate period to 12 months. Employees who take part in protected industrial action now benefit from stronger protections against dismissal.
Additional reforms, including electronic balloting for union votes and new workplace access rights for trade unions, are expected over the next couple of years.
Equality action plans and enforcement
Large employers with 250 or more employees will be required to publish annual equality action plans addressing gender pay gaps and menopause support. The government currently expects this to start as a voluntary measure in 2026 before becoming mandatory in 2027.
The Act also creates a new enforcement body, the Fair Work Agency, which will begin operating on 7 April 2026. The agency will have powers to enforce rights relating to holiday pay, statutory sick pay and the National Minimum Wage.
What employers should do now
Although many of the reforms will not take effect until 2027, employers should start preparing now. Employment contracts, workplace policies and settlement agreements may all need updating to reflect the new rules around flexible working, zero-hours arrangements, harassment protections and confidentiality clauses.
The shorter qualifying period for unfair dismissal and the removal of the compensation cap will also change the risk landscape for dismissals. Employers may therefore want to review their performance management and dismissal procedures.
Looking ahead
The Employment Rights Act 2025 represents a significant shift in UK employment law. It introduces new protections for workers while placing additional responsibilities on employers.
With implementation taking place gradually over the next two years, and many details still being developed through consultations and further regulations, employers should keep developments under review and begin preparing for the changes now.
