The Employment Rights Bill has today been granted Royal Assent becoming known as the Employment Rights Act 2025.  The Act is seen as the “biggest upgrade to workers’ rights in a generation” and brings changes to all areas of workers protection rights. One of the most significant reforms is the reduction of the qualifying period for unfair dismissal to six months (initially unfair dismissal was to be a day one right) and the introduction of the removal of the cap on compensation.  In addition, there will be changes to family friendly rights, zero hours contracts, enhanced trade union rights, and an effective ban on “fire and rehire.”     

Some sections of the Act, like provisions for zero-hours and low-hours workers, and rules on trade union access and recognition, still require additional consultation and clarification. Certain elements will also need secondary legislation to take effect.

Reminder of the reforms:

The Act brings significant new reforms, which will be introduced in a staged implementation timetable.  The below represents the timetable determined by the government in July 2025 but may be subject to change with further consultations required.  Some of the key provisions are highlighted below.

On Royal Assent or two months after assent:

  • Trade Union reforms including the repeal of the Strikes (Minimum Service Levels) Act 2023 and a vast majority of the Trade Union Act 2016. These will be repealed at assent and two months after assent respectively.

April 2026

  • Changes to the collective redundancy protective award which will be increased from 90 days to 180 days per employee (doubling the maximum period of the protective award).
  • Paterntiy leave and unpaid parental leave to become day one rights.
  • Disclosing sexual harassment to be added to the list of what counts as a qualifying disclosure for whistleblowing purposes.
  • The establishment of a fair works agency to take over the existing powers of certain labour authorities.  The agency will also have a new remit to ensure compliance with holiday pay.
  • Changes to Statutory Sick Pay – the removal of Lower Earnings Limit and waiting period. This means that SSP will be payable from day one of sickness at the rate of the lower of either the fixed flat rate or 80% of weekly earnings.
  • Simplification of the trade union recognition process and introduction of electronic and workplace balloting

October 2026

  • Fire and rehire: It will be automatically unfair to dismiss an employee if the sole or principal reason was because they did not agree to a “restricted variation” of their employment contract, such as pay, hours of work or changes to holiday or pensions entitlement. These changes will not apply retrospectively and there will be an exception for where a business is in extreme financial difficult.
  • Bringing forward regulations to establish the Fair Pay Agreement Adult Social Care Negotiating Body.
  • Tightening tipping law.
  • Duty to inform workers of their right to join a trade union as part of the required particulars given by employers and a provision to strengthen trade unions’ right of access.  
  • Changes to provisions regarding sexual harassment:  Requiring employers to take “all reasonable steps” to prevent sexual harassment of their employees (increase from merely reasonable steps) and introducing an obligation on employers not to permit the harassment of their employees by third parties.
  • Employment tribunal time limits will be extended from three months to six months for all types of claims apart from breach of contract claims.
  • Measures will be introduced to avoid a “two-tiered workplace” where there are ex-public sector and private sector employees.

1 January 2027

  • Changes to the unfair dismissal regime.  The qualifying period for claiming unfair dismissal will be reduced from the current two years to a six-month period.  The original proposals were for this to be a day one right.  However, this proved controversial and the government introduced an amendment proposing the reduction of the qualifying period instead. The indication is that there will be no transitional provisions, meaning that those with six month or more continuous employment at that date will be protected.
  • During the parliamentary process, and in response to the concession on the qualifying period, the government introduced a new provision that the compensation cap on unfair dismissal will be lifted.   Currently compensation is either 52 weeks’ gross salary or a statutory cap (currently set at £118,223), whichever is lower.  Despite concerns from business leaders that this will make it more difficult for employers to dismiss more senior and higher paid employees, the House of Lords accepted this amendment, relying on the government’s assurance that there will be a pre-implementation impact assessment. Secondary legislation will be introduced to make this change.  It is not clear whether this change will also come into effect on 1 January 2027

2027

  • Equality pay gap and menopause action plans (to be introduced on a voluntary basis in April 2026) – employers with over 250 employees will be required to publish these.
  • Enhanced rights for pregnant workers, including extending enhanced dismissal protection for redundancy to cover other dismissals for pregnant women and new mothers.
  • Flexible working – employers required to justify any decision to decline flexible work.
  • Bereavement leave – there will be a statutory right to 1 week of unpaid bereavement leave for employees in the event of a death of a much wider group, and this will include a still birth or pregnancy loss before 24 weeks of pregnancy.
  • Blacklisting – existing protections would be extended to cover discriminatory actions by bodies other than employers or employment agencies.
  • Regulation of umbrella companies – they will be brought within the regulation of the employment Agency Standards Inspectorate (and later the Fair Work Agency).
  • Collective redundancy consultation – a new threshold test will be introduced requiring collective consultation if a threshold (to be defined in regulations) is met across all sites/workplaces.
  • Ending exploitative use of Zero Hour Contracts and applying Zero Hour Contract measures to agency workers – guaranteed hours no less favourable must be offered by the employer, based on an initial reference period of 12 weeks.

Dates yet to be confirmed.

  • Confidentiality clauses in settlement agreements that seek to prevent a work from speaking about an allegation of harassment or discrimination will be null and void, save if an “excepted agreements” which may cover settlement agreements where certain conditions are met.
  • A new obligation will be introduced on employers to keep records showing compliance with holidays entitlement for 6 years. This will be a criminal offence, with potential unlimited fines for employers found in breach.

Next steps

The Act is complex, and further details are required in many areas.  We will update clients on the further details in regulations as they are produced and will keep you updated on the steps to be taking to prepare for these changes.