The Employment Rights Act 2025 will introduce enhanced protection for workers with major changes to both unfair dismissal rights, and collective and trade union rights. These changes have the potential to have a significant impact on the “bottom line”, and businesses need to start planning now.
Daniel Wilde, Head of Employment Law, looks at what is coming down the line and what employers can do to prepare.
The Employment Rights Act 2025 – Changes and Timeline
From February 2026:
- In relation to industrial action, balloting and notice requirements are reduced.
From April 2026:
- Statutory Sick Pay (SSP) – the 3 days’ waiting period is removed and SSP is payable from the first day of absence rather than the fourth.
- Paternity and unpaid parental leave become a day-one right and extended to lower paid employees.
- E-balloting for industrial action.
- Simplification of trade union recognition procedures.
- Significant increase in the protective award for failing to comply with the collective redundancies’ consultation regime – increases from 90 days’ pay per employee to 180 days.
From October 2026:
- The time limit for bringing claims to the employment tribunal doubles from 3 months to six months.
- Significant restrictions on the ability for employers to use “fire and rehire” tactic to vary terms and conditions with employers facing automatic unfair dismissal claims of they dismiss an employee to impose changes to key contractual terms e.g. pay, working hours and pension without agreement. Employers will in most cases have to agree the changes with their workforce, with exceptions for employers facing financial distress.
- Employers become liable for third party harassment imposing an obligation on employers to stop harassment by third parties in the workplace.
- New rules restricting the use of non-disclosure clauses in settlement agreements in cases of harassment and discrimination.
- Rights for trade unions to access workplaces and duty to inform workers of their right to join a trade union.
From 1st January 2027:
- The qualifying period for standard unfair dismissal claims will be reduced from 2 years to 6 months.
- The cap on compensation for unfair dismissal claims will be lifted (currently the lower of a year’s salary or £118223).
- Zero-hour workers will gain the right to regular hours contract and notice of shifts cancellation/compensation.
- The introduction of a reasonable requirement to employers considering flexible working requests meaning employers can only refuse a request if it is reasonable to do so and employers obliged to state the ground for refusal and why it is a reasonable refusal (The penalties for non-compliance remain unchanged at 8 weeks’ pay).
- Collective redundancies – consultation obligations imposed where an employer makes redundancies across multiple sites – currently rules only apply where employer proposes to dismissal 20 or more employees at a single establishment.
- Bereavement leave will become a day-one right.
Comment
While the Government had said in its manifesto unfair dismissal would be a day one right, this has been slightly watered down to a six-months service requirement. However, there is a nasty sting in the tail for employers with the long-established cap on unfair dismissal compensation being removed. Currently this was limited to most employees to a year’s salary with an upper limit of £118,223.00. In our view, the removal of the cap is extremely momentous. It will have particular impact on employers managing high-earning employees who previously would be deterred from pursuing claims due to the cap on compensation. Employers will need to use probation periods effectively and ensure that all managers are trained to manage effectively both during the probation period and thereafter. Almost inevitably these changes (and the extension of the time period from three to six months) will lead to more claims and to an increase in the cost of negotiating severance packages.
Larger employers who engage with trade unions (and those that currently do not) will note the changes to the collective redundancy regime with penalties for non-compliance increasing from 90 days per employee to 180 days. Perhaps as important is the extension of the regime so that multi-site large scale redundancies are covered -previously the regime typically only applied where 20 or more employees were being made redundant at a single site. Combined with the restrictions on fire and re-hire, simplification of recognition procedures and other rules relating to trade union rights, unions will be in far more influential position since the advent of the 1980s and 1990s trade union reforms.
It is not hyperbolic to state that these changes are generational and that the role of employment lawyers will become increasingly important in managing business risk.
How can we help?
Dan has worked in Employment Law for over 25 years and during that time he has represented clients across both the public and private sectors, acting in many high profile, complex cases.
Widely recognised for his expertise in this area, Dan has been named amongst the most influential Employment Lawyers in Wales and is consistently ranked by both Chambers and Legal 500.
If you need Dan’s assistance in preparing for the incoming changes as a result of the Employment Rights Act 2025, please get in touch.
