Employment Rights Act 2025: 5 ways employers can prepare now

A significant change to UK employment law is approaching. Both employers and employees will need to understand how the Employment Rights Act 2025 will impact them.   

The Act received Royal Assent in December 2025, with key changes being phased in throughout 2026 and 2027. 

In this blog, we’ve outlined everything you need to know about the changes coming into force this year, and how you can prepare.

We are also running a series of in-person events titled ‘Staying Compliant in 2026: The Essential Seminar on Employment, Pay & People’ throughout February & March in Glasgow, Stirling, Belfast and Aberdeen – sign up here to attend Events Archives | AAB. 

A summary of what the Employment Rights Act means in practice

The Employment Rights Act 2025 marks a clear change in direction. It signals a stronger, more assertive approach to UK employment law.  

At its core, it reflects the government’s stated desire to strengthen the economy, boost wages, reduce insecure work for people across the country, and modernise employment rights. 

For employers, now is the time to take proactive steps and stay informed as the phased rollout begins.  For workers, it’s about greater security and fairer treatment.  

What are the changes being made in the Employment Rights Act 2025 and when will they take effect?

1. Unfair dismissal and probationary periods

Perhaps the most significant reforms in the Employment Rights Act are the amendments being made to unfair dismissal, presenting some important changes that businesses need to be aware of.  

The Act will lower the qualifying service requirement for unfair dismissal claims from 2 years to just 6 months by January 2027.   

The cap on how much compensation can be claimed for unfair dismissal will also be removed. Currently, compensation for unfair dismissal is capped at either one year’s pay or £118,223, whichever is lower.  

This is significant and could see unfair dismissal claims become more costly, making it essential for businesses to review their disciplinary and dismissal policies.  

2. New rules for statutory sick, parental & paternity leave

From April 2026, statutory parental and paternity leave will become a right from the first day of employment, meaning workers will be allowed to hand in their notice of leave from their first day on the job.  

Another change employers can expect is the removal of the lower earnings limit for statutory sick pay. Currently, workers must earn a minimum amount to be eligible. This will also be paid from the first day of illness, instead of the fourth. 

The enforcement of employment rights in the UK will be centralised into a new government body called the Fair Work Agency (FWA). The organisation, which is set to launch on 7 April 2026, will oversee issues like the National Minimum Wage and statutory sick pay. 

3. Whistleblowing protection and collective redundancy

Also in April 2026, there will be a tightening of the rules around collective redundancy and whistleblowing.  

The maximum ‘protective award’ for failure to consult on collective redundancy will double from 90 days’ pay to 180 days’ pay.  

Sexual harassment will become a ‘qualifying disclosure’ under the changes being made to whistleblowing law. This will protect whistleblowers making sexual harassment disclosures from detriment and unfair dismissal.  

4. Worker protections & employment status  

The Employment Rights Act UK will strengthen protections for workers, clamping down on unethical practices like fire-and-rehire.  

In 2027, the Act will make dismissing an employee and rehiring them under worse terms and conditions automatically unfair except in prescribed circumstances.  

Employers will also have to take “all reasonable steps” to prevent sexual and third-party harassment in the workplace.  

Those who have put in place “reasonable steps” to prevent sexual harassment in line with the 2024 duty should be in a good position when this requirement is increased in October 2026.  

5. Zero-hour contracts & flexible working

Firmly in the line of fire are zero-hour contracts. Changes mean employees will soon have the right to request guaranteed working hours, if they want them.  

Next year, changes are also being made to flexible working law in the UK. This means that if a request for flexible working is rejected for genuine business reasons, employers will have to state a reason and explain why they think the decision is reasonable.  

When considering these cases, employers will also need to think of the total number of people affected across their organisation, instead of a single workplace.  

6. Employment Tribunal Time Limits

Another significant change not to be missed – the time limit for employees to bring a claim to a tribunal will be increased from 3 months to 6 months. This is expected to come into force no earlier than October 2026. 

This change extends the window of potential legal exposure for employers and increases the importance of thorough documentation, clear decision-making and early issue resolution.

7. Electronic and workplace balloting for trade unions

Electronic and workplace balloting for trade unions, allowing for digital voting for industrial action, is expected to be introduced no earlier than August 2026, breaking from the originally anticipated October 2026 timeline.  

This shift aims to modernise voting, with specific regulations and a Code of Practice to be finalised beforehand to ensure security. 

How can you prepare for the changes to the Employment Rights Act UK now?

Trying to second-guess regulatory changes is a risky game. The smarter move is to focus on readiness. Businesses that prepare early are better placed to respond calmly, protect margins and keep their people happy.  

When it comes to preparing for the Employment Rights Act, employers should: 

1. Start with the basics by seeking help to review employment contracts, policies and working arrangements. 
2. Ensure these reflect how your business operates today, as small gaps in areas like flexible working could quickly become costly when the new rules come into effect.
3. Get the lay of the land when it comes to your workforce mix. Have a look at your employees, workers and contractors. See who does what and where the biggest risks lie.  
4. Stress test your people costs by modelling different scenarios. Testing changes to pay, benefits, tax or compliance can give you a clear understanding of the impacts early on, leaving you with more options.  
5. Finally, look at your governance and decision-making. Can your processes adapt quickly? Are responsibilities clear? When change comes, speed and clarity make all the difference.  

Why changes to UK employment law matter for finance and business leaders?

The Employment Rights Act isn’t just an issue for HR professionals. It’s also a finance and risk concern. Reforms to UK employment law will have a direct impact on cost forecasting, with changes to pay, benefits, working time and employment status quickly shifting payroll costs.   

Go even further and add employer taxes, pensions or compliance overheads to the mix, and that number goes up even more.  

As a result, finance leaders need to start cost forecasting any changes to these areas early on to avoid surprises later down the line.  

Another essential component to consider is risk management, as changes to the likes of unfair dismissal claims could further expose companies to penalties. Without early financial oversight, small people-related decisions can turn into material business risks.  

Workforce strategy is also something to think about. How you structure your workforce today affects its flexibility tomorrow.   

Bringing a commercial lens to workforce planning strengthens decision-making across the business and better prepares your firm against disruptions in the future.  

How AAB can help  

If you’re looking to make sense of these changes while ensuring your firm is compliant with any and all regulations, our dedicated team of People Services, Payroll and Employment specialists are here to help.