The Employment Rights Bill 2025

The Employment Rights Act 2025 became law on 18 December 2025, after receiving Royal Assent. Introduced by the Labour government, the Act aims to strengthen employee’s rights across the UK. Below is a breakdown of the key changes and what they may mean for you or your business.

Unfair Dismissal Changes – January 2027

Unfair dismissal occurs when an employee is dismissed without a fair reason or where the employer fails to follow a fair and lawful process. Fair reasons for dismissal typically include conduct, capability, redundancy, statutory illegality, or some other substantial reason. Even where a fair reason exists, employers must still follow a reasonable procedure before dismissing an employee.

Under previous legislation, in most cases, employees were required to complete a minimum of two years’ continuous service before gaining the right to bring an unfair dismissal claim. This qualifying period has now been significantly reduced. From January 2027, employees will only need six months’ service before they are entitled to bring such a claim. This change has attracted considerable controversy, as six months is typically the point at which many employees pass their probationary period, meaning they will already have acquired statutory protection against unfair dismissal at a much earlier stage in their employment.

In addition to the shortened qualifying period, the cap on compensation for unfair dismissal has been removed entirely. As a result, successful claims may now lead to unlimited financial awards. This represents a major shift in the employment law landscape and significantly increases the potential risk for employers while offering the employee more protection.

Statutory Sick Pay (SSP) Reforms – April 2026

From April 2026, Statutory Sick Pay will become more accessible and supportive for employees:

• SSP will be payable from the first day of sickness, rather than the fourth.
• The lower earnings limit is being removed, meaning all employees, regardless of income level or hours worked, will be entitled to SSP.

These changes are intended to increase financial security for employees but will require employers to review absence management practices, payroll systems, and sickness policies.

New Responsibilities Under the Sexual Harassment Bill

One of the most significant developments under the reforms is the strengthened and proactive duty on employers to prevent sexual harassment in the workplace.

Employers will be legally required to take “all reasonable steps” to protect employees from sexual harassment, including harassment by third parties such as customers, clients, service users, or contractors.

To comply with this duty, employers will need to:

• Provide regular, meaningful training for staff and managers
• Conduct workplace risk assessments
• Review and strengthen policies, reporting mechanisms, and disciplinary procedures

Failure to demonstrate compliance may result in substantial fines and enforcement action, making prevention, evidence, and a clear audit trail essential for employers.

Ban on Zero‑Hour Contracts – 2027

In 2027, zero‑hour contracts are scheduled to be banned. Employees will instead have the right to a contract that sets out a guaranteed minimum number of working hours per week.

This change has generated considerable debate. Zero‑hour contracts can offer flexibility for both employers and employees, particularly students or those with changing availability. However, the reform aims to improve job security, income predictability, and work‑life balance. However, sectors that rely heavily on casual or seasonal labour, such as hospitality, travel, and retail, will feel the impact.

Strengthened Paternity and Maternity Rights

The Act also introduces enhancements to maternity and paternity rights, providing parents with stronger protections and greater flexibility around childbirth or adoption. While the precise entitlement details may vary across regulations, the overarching intention is to create a fairer and more supportive framework for working families, including improved access to leave and protection from detriment.

Conclusion

The Employment Rights Act 2025 represents one of the most significant reforms to UK employment law in recent years. While the changes aim to improve fairness, stability, and protection for employees, they also introduce new legal and financial risks for employers.

(This article is not intended to be comprehensive or to provide specific legal advice.  It should not be relied upon in the absence of specific advice given in relation to particular circumstances.)

For further information, please contact: Lesley Smith or Carina Pennant-Williams