Employment Rights Act 2025: Key Points Employers Need to Know

The Employment Rights Bill, described as the “biggest upgrade to rights at work for a generation”, received Royal Assent on 18 December 2025, becoming the Employment Rights Act 2025 (ERA 2025). A phased roll out of reforms, fundamentally altering workers’ rights and employer obligations, will begin in April 2026 and continue throughout 2027. Employers will need to start preparing for these changes that are set to affect workforce policies, HR processes and tribunal risk.

In this article, Charlotte Buck of our Employment Team takes a look at some of the key changes coming into effect in 2026/2027.

April 2026

Statutory Sick Pay (SSP)

As of April 2026, statutory sick pay will be paid from the first day of illness, instead of the fourth day. The Lower Earnings Limit (LEL) will also be removed, extending access to low paid workers – presently, only workers earning above the LEL (currently £125.00 per week) qualify for SSP.

The weekly rate of SSP, which has been £118.78 since April 2025, is expected to increase to £123.25 or 80% of the employee’s normal weekly earnings, whichever is lower.

These changes will increase the cost and administrative responsibility for employers. Employers will need to ensure policies are amended and that payroll systems are updated to calculate entitlements accurately and ensure timely payments.

Paternity Leave and Unpaid Parental Leave

As of April 2026, paternity leave will become a ‘day one right’, allowing someone to give notice of leave from the first day of employment – currently someone must have worked for their employer for 26 weeks.

Ordinary unpaid parental leave will also become a day one right – currently someone must have worked for their employer for one year to be eligible.

These reforms, which form part of a wider effort to strengthen family-friendly workplace rights, will require employers to update leave policies and HR procedures to accommodate earlier eligibility and ensure leave requests are processed correctly from the start of employment.

Collective Redundancy: Doubling of Protective Award

As of April 2026, the maximum protective award for an employer’s failure to comply with collective consultation requirements in redundancy situations will double from 90 to 180 days’ gross pay per affected employee. Doubling the maximum protective award significantly increases the legal and financial consequences for employers who fail to comply with collective consultation obligations.

Whistleblowing Protections for Sexual Harassment

As of April 2026, sexual harassment will become a ‘qualifying disclosure’ under whistleblowing law, significantly strengthening legal protections for employees who raise concerns. From the point of implementation, workers who report sexual harassment will be protected from dismissal or detriment in the same way as those who report other forms of wrongdoing. This change is intended to encourage reporting and improve workplace accountability by removing fear of retaliation.

For employers, this reform places greater emphasis on having clear reporting channels, handling complaints properly, and maintaining up-to-date anti-harassment policies. A failure to respond appropriately could result in whistleblowing claims, where compensation is uncapped and reputational damage can be significant. Ensuring managers are trained to identify and deal with protected disclosures will be an important step in managing risk and remaining compliant.

October 2026

Dismissal and Rehire

As of October 2026, dismissing someone then rehiring them on less favourable terms and conditions will become an automatically unfair dismissal in most cases. This practice, often referred to as “fire and rehire”, will therefore carry significantly greater legal risk, particularly where employees are high earners or have long service.

Employers will need to explore alternative strategies, such as genuine and meaningful consultation and negotiation, before implementing contractual changes. Any decision to dismiss will need to be carefully justified, properly documented and handled in line with statutory requirements to reduce the risk of costly tribunal claims.

Harassment – All Reasonable Steps and Third-Party Liability

As of October 2026, the existing duty on employers to prevent sexual harassment increases to taking ‘all reasonable steps’. This will align with the existing statutory defence to vicarious liability in section 109(4) of the Equality Act 2010.

Employers will be liable for harassment of employees by third parties, for example customers or clients, unless they can demonstrate that they have taken all reasonable steps to prevent it happening. This will apply to all types of harassment, including sexual harassment and discrimination-related harassment. Consultation on what constitutes ‘all reasonable steps’ is expected in late 2026.

Employers will need to review policies, training and reporting procedures to ensure that third-party harassment is explicitly addressed. Proactive measures, such as clear codes of conduct for clients or visitors, staff training, and prompt investigation and remedial action, will also be key to mitigating liability.

Employment Tribunal Time Limits

As of October 2026, time limits for making a claim to an employment tribunal will increase to six months for all claims. The current time limit for most claims is three months. Employers should therefore expect that claims may be brought later than previously, potentially increasing exposure to historic events or disputes and a higher volume of claims.

January 2027

Unfair Dismissal Reforms

Shorter Qualifying Period

As of 1 January 2027, the qualifying period to bring an unfair dismissal claim will reduce from two years to six months, allowing employees to access tribunal claims much sooner. The change will take effect retrospectively, meaning any employee with six months’ continuous service by 1 January 2027 will be protected. Protection from unfair dismissal was previously expected to become a right from the first day of employment. The Government changed this before the Bill became law.

The reduction of the qualifying period is likely to result in a marked increase in unfair dismissal claims as employees will now be able to bring claims much earlier in their employment. Employers will need to ensure that performance management, disciplinary processes and dismissal procedures are followed meticulously from the outset.

Removal of the Statutory Cap on Compensatory Awards

The statutory cap on compensation for unfair dismissal is set to be removed (previously the lower of 12 months’ gross pay or £118,223.00), meaning tribunals may award unlimited compensation for unfair dismissal. The timing of the removal of the cap has not been confirmed, but it is expected to come into force on 1 January 2027, at the same time as the change to the qualifying service period for unfair dismissal.

For the majority of unfair dismissal claims, the removal of the statutory cap is unlikely to have a major impact as most awards never get close to the cap (the mean unfair dismissal award is circa £14,000.00). However, the risk for employers rises significantly when dismissing senior staff or high-earning employees, who may now find it financially worthwhile to pursue claims through the Employment Tribunal. Awards for such employees could include full lost earnings, bonuses and pension contributions, making tribunals a more attractive avenue than previously.

The change also increases potential exposure for older workers and employees with disabilities, who may bring claims for career-long loss of earnings, making settlements more complex and potentially higher in value.

The change is also likely to have a significant impact on the nature and scope of employment litigation. In particular, employees who had previously tried to shoehorn their ordinary unfair dismissal claims (for which compensation is capped) into whistleblowing unfair dismissal claims or discrimination claims (where compensation is uncapped) in order to circumvent the compensation cap will no longer need to do so. That said, there may still be other benefits of doing so, for example to take advantage of a more generous limitation regime for discrimination or where compensation for injury to feelings (not awarded in ordinary unfair dismissal claims) is sought.

Increased Pregnancy and Maternity Rights

The ERA 2025 will strengthen protections against dismissal for pregnant workers and those returning from maternity leave. Key changes include enhanced safeguards against dismissal or unfavourable treatment linked to pregnancy or maternity leave, as well as statutory bereavement leave for pregnancy loss before 24 weeks, giving parents time to grieve without risk to their employment.

Employers will need to update policies and handbooks to reflect these changes, ensure managers are aware of the new protections, and review dismissal or redundancy processes to reduce the risk of claims. These reforms form part of a wider push to support families and promote workplace equality.

The Government is yet to announce when in 2027 the new changes will come into effect.

Bereavement Leave

Employees in the UK will gain a new statutory right to bereavement leave, marking a significant step in supporting workers during periods of personal loss. The entitlement will cover the death of a child, partner or close family member, and will also include pregnancy loss before 24 weeks, allowing parents to take time off to grieve without risking their employment. It is not yet known whether this will be paid or unpaid leave.

Employers will need to update policies, payroll processes and manager guidance to reflect the new entitlement, including how leave is requested and recorded.

The Government is yet to announce when in 2027 the new changes will come into effect.

Key Takeaways

Employers will need to take proactive steps to prepare for the forthcoming reforms. This will involve reviewing and updating policies, procedures, reporting frameworks and day-to-day workplace practices to ensure compliance. Training for managers and staff will be essential to apply the new rights correctly and consistently. Failure to act may significantly increase the risk of tribunal claims, financial exposure and reputational damage.

How Pinney Talfourd Can Help

The ERA 2025 is a wide-ranging and complex piece of legislation, with many of the headline changes still subject to further consultation and secondary legislation. Our Employment Team at Pinney Talfourd can help employers navigate the new reforms, providing practical guidance, policy reviews and training to help ensure compliance and minimise tribunal risk.

If you would like support in understanding and implementing the changes being introduced by the ERA 2025, please contact our Employment Team.