Introduction – What Employers Should Be Aware of in 2026
The Employment Rights Act 2025 (ERA 2025) has now received Royal Assent, marking one of the most significant reforms to UK employment law in decades. The new Act replaces and updates large parts of existing employment protections, with a phased implementation through 2026 and 2027, affecting millions of workers and employers across England, Wales, and Scotland. In this blog, our employment law team looks at key changes coming into effect and outlines what employers should be doing to prepare.
What the ERA 2025 Is Aiming to Do
The ERA 2025 is designed to modernise workplace protections, enhance job security, and rebalance the rights and obligations between workers and employers. It spans a wide range of areas, from dismissal rights to parental leave, statutory entitlements, union recognition, and enforcement mechanisms.
Key Legal Changes Employers Need to Know
- Unfair Dismissal – Qualifying Period & Compensation
- Change: The qualifying period for ordinary unfair dismissal will be reduced from two years to six months, with this change expected to come into effect on 1 January 2027.
- Crucial Update: In a late amendment, the Government abolished the statutory cap on unfair dismissal compensation (previously the lower of 52 weeks’ pay or a set financial limit). This significantly increases the financial risk of claims for high earners.
- Action: Strengthen probation reviews and ensure all dismissal documentation is robust from the outset.
- Statutory Sick Pay (SSP) – Eligible from Day One
- Change: SSP will be payable from day one of sickness; the three-day waiting period is removed.
- Earnings Limit: The Lower Earnings Limit for SSP eligibility has also been removed, making it accessible to those on the lowest incomes.
- Action: Employers should update payroll systems and sickness absence policies ahead of April 2026.
- Increased Day-One Employment Rights
- Change: Paternity leave and unpaid parental leave will become “day-one” rights, meaning employees no longer need a minimum period of service to qualify.
- Action: Update contracts, handbooks, and workforce planning to accommodate these earlier requests.
- New Statutory Bereavement Leave
- Change: A new legal right to time off following the death of a loved one. This also extends to include pregnancy loss before 24 weeks.
- Action: Introduce clear bereavement leave policies and provide managers with guidance on handling these sensitive situations.
- Zero-Hours Contracts Restricted
- Change: Workers will have a right to a contract that reflects the regular hours they actually work (typically assessed over a 12-week reference period).
- Action: Review casual working arrangements and implement systems to track hours for “guaranteed hours” offers.
- “Fire and Rehire” Strictly Restricted
- Change: Dismissal for the purpose of forcing contract changes is now automatically unfair unless the employer can prove severe financial necessity and that they have exhausted all consultation alternatives.
- Action: Ensure meaningful consultation and seek legal advice before attempting any variations to core terms.
- Tougher Redundancy Consultation Rules
- Change: The test for collective redundancy consultation is now based on the “whole business” rather than just one “establishment.” Furthermore, the maximum protective award for failure to consult has doubled to 180 days’ pay.
- Action: Start redundancy planning earlier and document the “establishment” rationale with extreme care.
- Tribunal Time Limits Extended
- Change: The time limit for bringing most employment tribunal claims will increase from 3 months to 6 months.
- Action: Maintain detailed personnel and disciplinary records for longer periods.
- Stronger Trade Union Rights
- Change: New rights for unions to access workplaces and a simplified recognition process (removing the 40% threshold requirement).
- Action: Review employee relations and engagement strategies.
- Fair Work Agency (FWA) – New Enforcement Body
- Change: A new “super-regulator” to enforce minimum wage, holiday pay, and SSP. It carries significantly higher inspection and penalty powers.
- Action: Conduct compliance audits to ensure “inspect-ready” records.
Implementation Timetable
Implementation is phased to allow businesses to prepare. Key dates include:
| Date | Key Milestone |
| Dec 2025 | Immediate: Repeal of the Strikes (Minimum Service Levels) Act 2023. |
| Feb 2026 | Initial Trade Union reforms and increased industrial action protections. |
| April 2026 | Major Wave: Day-one parental/paternity rights, SSP reforms, and launch of the Fair Work Agency. |
| Oct 2026 | New “all reasonable steps” duty to prevent sexual harassment (including third-party harassment). |
| Jan 2027 | The Big Shift: Unfair dismissal 6-month qualifying period and removal of the compensation cap. |
Immediate Employer Actions
- Audit Contracts: Check for outdated service requirements for leave and sick pay.
- Reform Probation: Move to a 3-month/5-month review cycle to ensure decisions are made before the 6-month unfair dismissal threshold.
- Track Hours: Establish systems for zero-hours workers to monitor their “regular” hours.
- Manager Training: Train leadership on the new “automatically unfair” fire-and-rehire and redundancy rules.
Key Takeaway
The Employment Rights Act 2025 represents a fundamental shift in employer obligations. Early preparation will reduce legal risk, improve workforce stability and ensure compliance as the new regime takes effect.
Employment Lawyers London
Muscatt Black Graf is a long-established specialist law firm of highly experienced lawyers who provide exceptional client care and straightforward advice. Our employment law team is here to help guide you through the upcoming changes, offering specialist, commercially minded legal advice on all aspects of employment law to both individuals and businesses.
For more information or to speak to one of our team, email us at contact@muscattblackgraf.com or click here to complete our online contact form.
If you are looking for advice and guidance on employment law and want to discuss your next steps, please call Muscatt Black Graf today on 0207 586 1141.
Useful Resources
Official Government Guidance
- GOV.UK: Employment Rights Act 2025 – Factsheets
- Access the complete set of 20+ factsheets covering everything from Zero-Hours Contracts to the new Fair Work Agency.
- The Implementation Roadmap (Official PDF)
- A definitive timeline showing which provisions land in April 2026, October 2026, and early 2027.
- Department for Business & Trade: Press Release (18 Dec 2025)
- The official announcement confirming Royal Assent and the final “ping-pong” amendments.
Advice & Industry Analysis
- Acas: The Employment Rights Act 2025 Hub
- Practical advice on day-one rights, including upcoming masterclasses and training for managers on bereavement and paternity changes.
- CIPD: Employment Law Tracker 2025/26
- Detailed analysis from the professional body for HR, focusing on the removal of the unfair dismissal compensation cap.
- UK Parliament: Bill Passage & Amendments
- Review the final text of the Act and the specific legislative changes made to the Employment Rights Act 1996
This blog was published in January 2026, and information may have changed since publication. It is not intended to be advice and should not be relied upon as such.