On the 18th December 2025, the Employment Rights Bill received Royal Assent and formally became the Employment Rights Act 2025. This concludes the legislative process and confirms the statutory framework for one of the most controversial packages of employment law changes in recent years.
Key Points
- The Employment Rights Bill received Royal Assent on 18 December 2025 and is now the Employment Rights Act 2025.
- Most provisions will be implemented in phases during 2026 and 2027, rather than applying immediately.
- The qualifying period for ordinary unfair dismissal claims will reduce from two years to six months, expected to take effect on 1 January 2027.
- The statutory cap on unfair dismissal compensation will be removed, materially increasing potential financial exposure for employers.
- Reforms affecting zero-hours and low-hours contracts are expected to take effect in 2027, subject to secondary legislation.
- Day one rights to statutory sick pay, paternity leave and unpaid parental leave are expected to come into force in April 2026.
Employment Rights Act 2025
Royal Assent provides certainty as to the content of the reforms. However, it does not mean that the new rights and obligations apply immediately. Most of the Employment Rights Act 2025's provisions will be commenced in phases during 2026 and 2027, with further detail to be set out through secondary legislation and statutory guidance. For employers, the emphasis now shifts from legislative monitoring to practical preparation.
The Employment Rights Act 2025 has been deliberately structured to allow for staged implementation. This reflects both the breadth of the reforms and the Government’s stated intention to give employers time to adapt policies, contracts and systems. Royal Assent should therefore be understood as the start of a transition period, rather than a point of instant legal change.
Unfair dismissal
Two of the most significant changes concern unfair dismissal.
First, the Employment Rights Act 2025 reduces the qualifying period for ordinary unfair dismissal claims from two years to six months. Earlier proposals for full “day one” unfair dismissal rights were not adopted. The six-month threshold is now settled law, and is expected to be brought into force on the 1st January 2027.
Once commenced, this change will significantly expand the group of employees eligible to bring unfair dismissal claims. Employers will need to place greater emphasis on probation management, early performance issues, and consistency in dismissal decision-making from the outset of employment.
Secondly, the Employment Rights Act 2025 removes the statutory cap on compensatory awards for unfair dismissal. Currently, compensation is limited to the lower of either 52 weeks’ pay or £118,223.00. The removal of the cap materially alters the risk profile of dismissal decisions, particularly in relation to higher-paid roles.
Other Measures
The Act also introduces changes aimed at increasing predictability for workers engaged on zero-hours and low-hours contracts, one of the most debated aspects of the legislation. It establishes rights to reasonable notice of shifts and, in defined circumstances, an entitlement to be offered a contract reflecting hours regularly worked over a reference period. Much of the operational detail, including reference periods and exemptions, will be set out through secondary legislation. These provisions are currently expected to take effect during 2027.
Some changes are expected to come into force earlier. The Employment Rights Act provides for day one entitlement to statutory sick pay, paternity leave and unpaid parental leave. These changes are expected to be implemented in April 2026 and will require updates to payroll systems, onboarding processes and internal policies.
Beyond the headline measures, the Employment Rights Act 2025 also incorporates many other changes, details of which are set out in our article on the 2026 Employment Law Changes.
With Royal Assent now secured, employers should begin structured preparation. This includes reviewing dismissal and probation procedures, reassessing settlement and litigation risk in light of uncapped compensation, auditing the use of zero-hours arrangements, and ensuring HR systems can accommodate new day one rights.
Employment Rights Act 2025: Implementation Time Frame
- Phase 1 — Royal Assent (18 December 2025) and immediate effect:
- Employment Rights Bill receives Royal Assent and becomes the Employment Rights Act 2025.
- Immediate repeal of the Strikes (Minimum Service Levels) Act 2023.
- Removal or annulment of most Trade Union Act 2016 measures (with some elements repealed later via commencement orders).
- Removal of the requirement for trade unions to hold political fund ballots every 10 years.
- Simplification of industrial action ballot and notice requirements.
- Strengthened protection against dismissal for taking part in lawful industrial action.
- January to March 2026 — Pre-April implementation and consultations:
- January 2026: consultations scheduled to close on measures due in 2027, including statutory bereavement leave (including pregnancy loss) and strengthened dismissal protections for pregnant workers and those returning from maternity leave.
- February 2026: trade union reforms take effect, including reduced notice periods for industrial action (14 to 10 days) and extension of strike mandates (6 to 12 months).
- February 2026: removal of the 12-week limit on automatic unfair dismissal protection for participation in lawful industrial action.
- February 2026: repeal of the requirement to appoint a picket supervisor.
- February 2026: simplification of ballot paper and strike notice information requirements (reverting largely to pre-2016 standards).
- Early 2026: removal of public-sector “check-off” restrictions and repeal of public-sector facility time reporting requirements.
- By April 2026: electronic and workplace balloting for industrial action expected to be enabled, following consultation.
- Phase 2 — April 2026:
- Collective redundancy protective award expected to double.
- Day-one entitlement to paternity leave and unpaid parental leave.
- Whistleblowing: sexual harassment added as a protected disclosure.
- Statutory Sick Pay (SSP): day-one entitlement (removal of the 3-day waiting period) and removal of the lower earnings limit.
- Fair Work Agency established, consolidating key employment enforcement functions (including holiday pay).
- Trade union recognition process streamlined.
- Gender pay gap and menopause action plans: voluntary reporting period begins for large employers.
- Phase 3 — October 2026:
- Ban on “fire and rehire” except where necessary to ensure business survival and following a proper procedure.
- Replacement of the existing statutory code on dismissal and re-engagement.
- Sexual and third-party harassment: duty to take “all reasonable steps” to prevent harassment comes into force (with detailed regulations expected later).
- Union access and information duties strengthened.
- Enhanced rights and protections for trade union representatives.
- Extension of most employment tribunal time limits from 3 months to 6 months.
- Enhanced protection against detriment for participation in industrial action.
- Adult social care pay body established.
- Further tightening of the law on allocation of tips.
- Two-tier workforce code implemented (procurement).
- Phase 4 — December 2026:
- Mandatory seafarers’ charter introducing new minimum employment standards.
- Phase 5 — 2027 (later-stage reforms):
- 1 January 2027: unfair dismissal qualifying period reduced from two years to six months.
- 2027 (following consultation and impact assessment): removal of the statutory cap on unfair dismissal compensation.
- Zero-hours contracts: right to guaranteed hours where regular hours exceed contract over a reference period; reasonable notice of shifts and compensation for short-notice changes; extension to agency workers.
- Flexible working: refusals permitted only where “reasonable”, with mandatory consultation and written explanation (subject to secondary regulations).
- Gender pay gap and menopause action plans: mandatory publication for large employers (250+).
- Strengthened dismissal protections for pregnant workers and those returning from maternity leave.
- New statutory bereavement leave (likely unpaid and extending beyond current parental bereavement leave).
- Changes to collective redundancy consultation thresholds and the definition of “establishment”.
- Regulation of umbrella companies to improve transparency of pay and deductions.
- Extension of blacklisting protections, including coverage of predictive technologies.
- Further modernisation of the industrial relations framework, including collective grievance mechanisms.
Cost Pressures, AI, Automation, & Political Uncertainty
The Employment Rights Act 2025 must also be viewed in its wider economic context. The Government’s own impact assessments estimate that the Act will add around £5 billion to employers’ annual costs, in addition to the £18 billion increase in employer National Insurance contributions introduced separately. Together, these measures significantly increase the cost of employing staff at a time when the costs of automation and AI-driven solutions are falling rapidly. As we highlighted in a previous article, the effect is to widen the economic gap between labour and technology, increasing incentives for businesses to pursue technology-led restructuring, outsource abroad, reduce staff numbers, and avoid the need to take on people in the first place.
The longer-term durability of the Employment Rights Act 2025 is also politically uncertain. Current polling places the Labour Government well behind its rivals (in some polls, as low as 4th place), and opposition parties have signalled an intention to reverse substantial elements of the employment law changes. The Conservative Party leader, Kemi Badenoch, has stated that: “at the first opportunity, a Conservative government under my leadership will repeal every job-destroying, anti-business, anti-growth measure in this Bill”. Reform UK has adopted a similarly uncompromising position. Its Deputy Leader, Richard Tice, has described the legislation as “a disaster” and said that it should be “scrapped … lock, stock and barrel”.
As a result, many of the Employment Rights Act’s provisions may ultimately have a very short shelf life. Employers should therefore prepare for compliance with the law as enacted, while remaining alert to the possibility of further legislative change driven by economic pressures and political realignment later on.
Employers: What This Means
- Dismissal risk will arise much earlier in employment once the six-month unfair dismissal qualifying period takes effect in 2027, requiring more robust probation and early-stage performance management.
- The planned removal of the unfair dismissal compensation cap (subject to consultation in 2026) materially increases financial exposure, particularly in senior or higher-paid roles.
- From April 2026, day-one rights to statutory sick pay, paternity leave and unpaid parental leave will require updates to payroll systems, policies and onboarding processes.
- Trade union and industrial action reforms taking effect from early 2026 reduce procedural barriers and increase protection for lawful industrial action, affecting workforce planning and dispute management.
- Rising employment costs and regulatory complexity may accelerate decisions around automation, outsourcing and workforce restructuring.
