Employment Rights Act 2025 Update

Unfair Dismissal Rights (expected 01 January 2027)

At present employees need two years’ service to bring a claim for “ordinary” unfair dismissal. The Employment Rights Act 2025 reduces that qualifying period to six months’ continuous service. This change is expected to take effect on 1 January 2027. Protection from automatically unfair dismissal (for example whistleblowing) remains a day-one right.

Fire and Re-Hire (expected October 2026)

The practice commonly described as “fire and re-hire” will be significantly restricted. Dismissal and re-engagement to force through changes to terms and conditions will be automatcailly unfair except in very limited circumstances. An employer will need to show that the changes were necessary to deal with serious financial difficulties affecting the viability of the business.

The rules on collective consultation for redundancy (expected 2027)

The collective consultation rules currently apply where an employer proposes 20 or more redundancies at one establishment within a 90-day period. That threshold will remain. Additional triggers are expected to be introduced, likely based on a percentage of the workforce across the organisation, although the detail is still subject to consultation. The maximum protective award for failure to consult collectively will increase from 90 days’ pay to 180 days’ pay, expected from April 2026.

Outsourcing public services and TUPE (October 2026)

The Government intends to prevent the creation of a “two-tier” workforce when public services are outsourced. Public sector contracting authorities will be required to include terms in outsourcing contracts to protect pay and conditions. Transferring public sector workers must not be treated less favourably after transfer, and private sector workers engaged on the same contract must not be treated less favourably than transferred staff.

Zero-Hour Contracts (expected 2027)

Zero-hours contracts will not be banned. Employers will be required to offer a guaranteed hours contract where a worker’s actual hours regularly exceed those set out in their contract over a reference period, expected to be 12 weeks. This will apply to both zero-hours and low-hours contracts, subject to limited exceptions, including for genuinely short-term or fixed-term work. Workers without fixed or predictable working patterns will also have a right to reasonable notice of shifts, and to notice and compensation where shifts are cancelled or changed at short notice.

Flexible working (expected 2027)

The existing day-one right to request flexible working will remain. Employers will continue to be able to refuse a request only for one or more of the statutory business reasons. The test will be tightened so that an employer may rely on a business reason only where it is reasonable to do so in the circumstances.

Gender Pay (2027)

New regulations will require employers with 250 or more employees to publish equality action plans. These will include action plans addressing gender pay gaps. Separate regulations will require large employers to publish information identifying the use of contract workers and the entities that supply them.

Harassment (October 2026)

The law on harassment is being strengthened. Employers will be under a duty to take all reasonable steps to prevent sexual harassment in the workplace, replacing the current “reasonable steps” test. Employers will also be liable for harassment of their staff by third parties, including customers, contractors, service users and pupils. There are proposals to restrict the use of non-disclosure agreements in relation to harassment and discrimination complaints, although the final scope of this is not yet settled.

Right of Trade Union Access (expected at various times, but mainly October 2026)

Trade union officials will have expanded rights to access workplaces for recruitment, organising (excluding industrial action) and collective bargaining, subject to a statutory access process. The law will also make it easier for trade unions to obtain statutory recognition. Employers will be required to provide new starters with a statement confirming the right to join a trade union.

The Strikes (Minimum Service Levels) Act 2023 will be repealed, along with most of the Trade Union Act 2016.

Additional protections will be introduced for trade union members and representatives, including protection from detriment. A new statutory role of union equality representative will be created in workplaces with recognised unions, with functions focused on equality issues and engagement with employers.

Dismissal for taking part in industrial action will become automatically unfair. This will remove the current 12-week limit linked to protection for employees taking part in official industrial action.

Fair pay agreement in Adult Social Care (expected October 2026)

A new Adult Social Care Negotiating Body will be established on an industry-wide basis. It will include representatives of employers, trade unions and government. The Body will agree minimum pay and terms for the sector, which the Government will have the power to ratify and give binding legal effect across adult social care employers.

Maternity rights (2027)

Protection against dismissal during pregnancy and maternity leave will be strengthened. Dismissal during pregnancy, maternity leave, or within six months of return from maternity leave will be prohibited except in narrowly defined circumstances. The intention is to significantly limit employers’ ability to dismiss during this protected period.

Other family right changes (expected 2026)

A new day-one right to bereavement leave will be introduced. This is expected to provide at least one week of unpaid leave and to include pregnancy loss, although the detailed rules are still awaited. Parental leave and paternity leave will also become day-one rights, removing the current service requirements.

Menopause action plans (voluntary from April 2026, by law expected 2027)

Large employers with 250 or more employees will be required to produce and publish menopause action plans. An initial voluntary period is expected from April 2026, followed by a statutory requirement. Enforcement and penalties will be set out in secondary legislation.

Statutory Sick Pay (SSP) (April 2026)

Statutory Sick Pay will become a day-one right. The lower earnings limit will be removed, extending SSP entitlement to lower-paid workers.

Holiday records (no timescales indicated as of yet)

A new statutory duty will require employers to keep records demonstrating compliance with holiday entitlement and pay rules. Records will need to be retained for six years. Failure to comply will be enforceable by the authorities, with penalties to be set out in secondary legislation.

Employment Tribunal time limits and compensation cap (2026 - 2027)

The current time limit is 3 months for all claims, although there are rules for extensions in certain circumstances (which differ depending on the type of claim). The general time limit for most claims is being increased to 6 months.

The current compensatory award for ordinary unfair dismissal is subject to a statutory cap. The Employment Rights Act 2025 provides for the cap to be removed, so compensation may be based on the employee’s actual losses. The detail and commencement date are expected to align with the wider unfair dismissal reforms in 2027.

The Fair Work Agency (expected April 2026)

A new Fair Work Agency will be established to enforce employment rights. It will bring together existing enforcement functions and will have investigatory and enforcement powers, including rights of entry and the ability to require production of documents.

Other possible changes 

The Government is considering, and calling for evidence in respect of, other possible changes, including:

• Making it discrimination to treat someone less favourably because of 2 protected characteristics (known as ‘dual discrimination’)

• Ethnicity pay gap reporting

• Disability pay gap reporting

• New pay transparency measures, including providing salary ranges when recruiting, not asking candidates about salary history and providing employees with information about their pay and how it compares to those doing the same role or work of equal value

• Equal pay rights based on ethnicity and disability, including the potential establishment of a new regulatory and enforcement unit

• Requiring employers to adopt a procedure for dealing with collective grievances

• Possibly, the removal of ‘worker’ status: The Government has said it wants to move towards a two-tier system of employment status, reducing the distinction between “employee” and “worker”

• Possible banning of unpaid internships