Employment Rights Act is a call to action for employers
A new year, a new employment framework: what employers need to know about the Employment Rights Act passed by parliament in December 2025.
The start of 2026 brings with it a significant shift in the UK employment landscape, following the passage of the Employment Rights Act 2025. After months of parliamentary ping-pong between the House of Commons and the House of Lords, the legislation finally received Royal Assent in December, marking one of the most substantial updates to workplace rights in a generation.
And for employers, the message is clear: while most of the changes will be phased in over the next two years, early awareness and preparation will be critical. The Act is designed to modernise employment protections, improve job security and strengthen enforcement – but it also introduces new compliance obligations and, potentially, a higher risk of disputes if processes are not robust.
A phased rollout, not an overnight change
Although the Act is now law, most of its provisions will not take effect immediately. The government has committed to a phased implementation programme, with most reforms coming into force on standard April or October commencement dates.
Key early changes include the repeal of the Strikes (Minimum Service Levels) Act 2023 and parts of the Trade Union Act 2016, which took effect shortly after Royal Assent. Other measures, including day-one statutory sick pay and paternity leave, and the launch of the new Fair Work Agency, are expected from April this year.
One of the most closely watched reforms, however, will not take effect until 1 January 2027: the reduction of the qualifying period for unfair dismissal claims from two years to six months. The government has also confirmed that the current cap on unfair dismissal compensation will be removed.
Unfair dismissal: earlier exposure for employers
The change to unfair dismissal rights represents a meaningful shift in risk management for employers. While the government stepped back from making unfair dismissal a day-one right, a six-month qualifying period still significantly shortens the window during which employers can terminate employment without the risk of a claim.
bined with the removal of the compensation cap and the extension of the time limit for bringing Employment Tribunal claims from three months to six months, employers may see an increase in both the volume and value of claims. This is particularly relevant given the existing backlog within the tribunal system, with such matters likely to remain unresolved for long periods.
For businesses, this places greater emphasis on consistent performance management, clear documentation, and fair procedures right from the start, through probationary periods and beyond.
Opening up to trade union engagement and tighter redundancy consultation
Stronger collective redundancy rights will see the introduction of tighter requirements on consultation. Another area that will require close attention from employers is the Act’s extension of trade union rights and engagement. The new framework lowers barriers to union access and strengthens protections for union activity, meaning employers may need to be more proactive in how they manage relationships with recognised unions and how they respond to requests for engagement.
Even where a workforce has historically had limited union involvement, organisations will need to ensure managers understand the new rights introduced by the Act, handle communications carefully, and apply policies consistently, as missteps in this area are likely to attract scrutiny once the reforms are fully in force.
Zero-hours contracts, flexibility and guaranteed hours
The Act also targets what the government describes as historic one-sided flexibility on the part of employers, with new rights for workers on zero-hours contracts, including access to guaranteed hours, reasonable notice of shifts and compensation for short-notice cancellations. Similar protections will apply to agency workers.
These measures are intended to provide greater security for workers, and employers in sectors that rely heavily on flexible staffing – such as hospitality, retail and logistics – will need to review workforce models carefully to ensure compliance without undermining operational needs.
Family-friendly rights and workplace protections
A number of reforms expand existing family-friendly and wellbeing protections. For Statutory Sick Pay, the Lower Earnings Limit and the waiting period have been removed. Paternity leave and unpaid parental leave will become day-one rights, and a new right to unpaid bereavement leave will be introduced, including for pregnancy loss before 24 weeks.
The Act also strengthens protections aimed at improving gender equality in the workplace. Large employers will be required to produce action plans setting out how they are addressing gender pay gaps and supporting staff through menopause, signalling a more structured and transparent approach to equality issues. Alongside this, new safeguards will limit dismissal for pregnant employees, those on maternity leave, and for at least six months after returning to work, except in defined circumstances, meaning employers will need to focus on fair treatment and careful decision-making during employee key life stages.
There are also stronger protections around harassment, requiring employers to take “all reasonable steps”, rather than simply “reasonable steps”, to prevent sexual harassment, including harassment by third parties. This change is likely to increase expectations around training, policies and workplace culture.
Enforcement and the Fair Work Agency
Another significant development is the creation of the Fair Work Agency, which will bring together enforcement of the National Minimum Wage, holiday pay, agency rules and labour exploitation. The Agency will have expanded powers, including the ability to bring tribunal claims on behalf of workers and impose civil penalties.
For employers, this signals a more proactive enforcement environment and reinforces the importance of compliance across pay, working time and contractual arrangements.
Planning ahead
Business reaction to the Employment Rights Act has been mixed, with concerns around cost, administration and flexibility needing to be balanced against the government’s aim of creating a more secure and productive workforce. What is clear, however, is that the scale of change warrants early engagement.
This is not a single reform but a package of changes that will reshape how employers manage risk, people and processes over the next few years. The phased timetable gives businesses breathing space, but those that wait until changes are live may find themselves on the back foot.
As 2026 begins, the priority for employers is to move on from the speculation and headlines of last year, towards a structured view of what the Act requires, when changes will take effect, and how policies, procedures and management practices should be reviewed in readiness.
If you have a query about the Employment Rights Act please do not hesitate in contacting Sean McDonough, using the details below.
Sean McDonough – Managing Partner and Head of Employment
Sean.McDonough@mogersdrewett.com