Introduction
The Employment Rights Act 2025 (ERA 2025) represents the most significant overhaul of
employment law in a generation. Some changes are already in force, others come in later this
year, and the most far-reaching reforms – including a dramatic cut to the unfair dismissal
qualifying period and the removal of the compensation cap – will take effect in January 2027.
A new government-backed agency has been established to help employers comply with the law
and to investigate and take action for non-compliance. At the same time, the penalties for
getting things wrong are going up.
This document will discuss the key changes being introduced by the ERA 2025.
Changes from April 2026
Statutory sick pay
First: workers now get SSP earlier. The three-day waiting period has been removed, so SSP is
payable from Day One of the absence.
Second: very low-paid workers now qualify for SSP for the first time. The lower earnings limit
– which previously blocked anyone earning less than £125 a week from getting SSP – has been
removed. This benefits zero-hours and part-time workers doing just a few hours each week and
means they are also eligible for sick pay.
Employees now get whichever is lower: the standard weekly rate or 80% of their average weekly
earnings.
Day One paternity and parental leave
Two changes to family leave also came into force in April.
First of all, paternity leave became a Day One right. Previously, employees needed 26 weeks’
service to qualify.
Unpaid parental leave also became a right from Day One of employment. This used to be
subject to a one-year service requirement.Overview of Employment Rights Act 2025 (ERA 2025) – April 2026
There’s one more change worth mentioning here – it isn’t an ERA 2025 provision, but it takes
effect on the same date. Since 6 April, bereaved fathers and partners have been entitled to up
to 52 weeks of paternity leave if the mother or primary adopter dies within the first year of the
child’s life.
Collective redundancies
If you’re thinking about making 20 or more employees redundant in a rolling 90 day period, you
have to consult with a recognised union or – if you don’t recognise a union – with elected
employee representatives. Before 6 April, if you breached these rules, a tribunal could order
you to pay an award of up to 90 days’ pay to each affected employee. That has now risen to 180
days’ pay.
Sexual harassment whistleblowing
Under the ERA 2025 workers who disclose sexual harassment are now entitled to whistleblower
protection because sexual harassment is now a protected whistleblowing disclosure itself.
For the disclosure to be considered a protected whistleblowing disclosure, it must be made in
the public interest. Essentially, this means that the sexual harassment offence complained of
must affect others, not just the person making the disclosure, but their colleagues or the
general public.
The Fair Work Agency (FWA)
This is the new agency referred to earlier. The Fair Work Agency is a new enforcement body for
certain employment rights. It’s another change that happened in April that’s gone under many
people’s radar but could be significant.
Various existing functions have been brought together in one place – for example, enforcement
of the national minimum wage has moved from HMRC to the new FWA. However, the agency
also has new powers. The most important is its ability to fine employers who underpay holiday
or SSP.
Annual Leave Records
This was an unexpected inclusion in the ERA 2025 as it was omitted from the government’s
timeline for changes. Employers are now under a new legal duty to keep adequate records
demonstrating they have complied with the holiday entitlement and pay rules. Records must be
kept for 6 years and include holiday taken, annual leave for irregular workers, holiday pay
entitlement and what’s included (i.e. bonus, commission etc) and payments made in lieu of
untaken holiday on the termination of employment.
Changes from October 2026
All reasonable steps – sexual harassment
Since October 2024, the sexual harassment preventative duty required employers to take
‘reasonable’ steps to prevent sexual harassment, if they did not, a tribunal could increase a
claimant’s compensation by up to 25%.
The ERA 2025 is tightening this. So employers must now take ‘all reasonable steps’ to prevent
sexual harassment to avoid the 25% uplift.
Third-party harassment
The ERA 2025 reintroduces the requirement for employers to prevent harassment from a third
party (such as a client or customer) across all nine protected characteristics under the Equality
Act 2010. Employers can be held liable for that harassment – even though the individual
responsible is not their employee. You will, however, have a defence if you can show you took
‘all reasonable steps’ to prevent the incident.
What else is expected in October?
A few other October changes are worth flagging briefly. This is not the complete list.
There’s a trade union reform that will affect you even if you don’t recognise a union. From
October, you’ll be required to inform new employees of their right to join a trade union.
Further, if you are an employer with 21 or more workers, trade unions will also gain the right to
access your workplace for activities like recruiting and representing members. So you might
need to get used to dealing with trade union representatives entering your workplace for the first
time.
For businesses in the hospitality sector, be aware that a further tightening of tipping laws is
also planned for October.
Tribunal time limit
There’s one final October change – though it’s listed as ‘no earlier than October 2026’, which
suggests it may slip. This is the doubling of the time limit for an employee to bring an
employment tribunal claim, from three months after the act being complained of, to six months.
January 2027
Unfair dismissal
The reduction in the qualifying period
This is a major change! The qualifying period for unfair dismissal protection is dropping from two
years to just six months.
Every employee with at least six months’ service on 1 January 2027 gains unfair dismissal
protection on that date. That means you’ll only have six months to assess the performance of
anyone you hire from 1 July this year before they get unfair dismissal rights.
The removal of the compensation cap
Another major change to unfair dismissal law is also due to take effect on 1 January next year.
This is the removal of the employment tribunal cap on compensation.
Currently, compensation is limited to 52 weeks’ gross pay or around £118,000 – whichever is
lower. The Government is abolishing both these caps.
Fire and rehire
The other big reform scheduled for January 2027 (pushed back from October 2026) is the ban on
fire and rehire. This will make it automatically unfair to dismiss an employee for refusing to
accept changes to core contractual terms. You won’t be able to force through such changes
using fire and rehire – that’s dismissing the employee and offering re-engagement on the worse
terms. Fire and replace will also be outlawed – which is dismissing the employee and replacing
them with someone prepared to accept the worse contract.
Later in 2027
We’ve given you a lot to process, but let’s just quickly look at what’s further down the track. Key
details are still missing, so for now just be aware that change is in the pipeline. Further reforms
worth flagging, not all, that are due later in 2027 are:
• Enhanced dismissal protections for pregnant women and new mothers.
• A Day One right to bereavement leave, including for employees who experience
pregnancy loss.
• Changes to the threshold for collective redundancy consultation for multi-site
employers.
• A requirement to give written reasons when refusing a flexible working request.Overview of Employment Rights Act 2025 (ERA 2025) – April 2026
Casual and shift workers
If you employ any casual or shift workers you will be required to offer a “qualifying worker”
(usually a zero-hour or low-hours worker) guaranteed hours which reflect the hours they work.
The guaranteed-hours plan is complex and there’s a lengthy list of unknowns about how it might
work. We’ll know significantly more in the coming months, and the reforms may get scaled
back.
You will also be required to provide shift workers with reasonable notice of shifts or shift
changes and pay shift workers for any shifts that you cancel, curtail, or move at short notice.
Next Steps
The ERA 2025 really is a mammoth piece of legislation that will keep us all on our toes for the
next couple of years. Here are the steps we recommend you take to reduce your risks of non-
compliance.
First, if you haven’t already updated your policies and payroll for the changes that were
introduced in April, do that now. That means SSP from Day One and Day One paternity and
parental leave.
Second, start preparing for the October harassment reforms. Review your risk assessments,
refresh your training, and make sure your anti-harassment policy covers third parties.
Third, get your house in order on probation and performance management. The unfair dismissal
qualifying period drops to six months in January. This is probably the most urgent thing on the
list.
And fourth, keep an eye on fire and rehire and the guaranteed hours rules. The detail is still
emerging, and we’ll know much more in the coming months.
