The Employment Rights Act: What Every Senior Executive Needs To Know

Many readers will already be aware that the Employment Rights Act 2025 became law on 18 December 2025. The government says that it represents the biggest upgrade in employment rights in a generation.

The act was first published as a bill in October 2024, intended to give workers more security, fairness, and dignity at work. Since then, it has undergone multiple readings in both the House of Commons and the House of Lords, as well as numerous rounds of amendments, before finally receiving royal assent in December.

Whilst this article focuses mainly on senior executives as employees, for those senior executives who are also managers, it is vital for them to ensure they are familiar with the changes introduced by the act. More than ever, they will need to seek legal input on how to navigate these changes. They will need to be mindful of the new unfair dismissal qualifying period when assessing the performance of new hires, the increased risk of litigation from employees, and the likely more robust negotiating strategies of senior employees who are being exited against their will.

What are the changes that you need to be aware of?

This article considers the key changes that the act brings, when they will be implemented, and what impact they will have on both employment rights as an employee, and obligations as a senior manager.

Key change 1: unfair dismissal rights from six months’ service

The act will reduce the current two-year qualifying period to a shorter period of six months, after which employees will acquire a legal right not to be unfairly dismissed.

Any employee with six months or more qualifying service on this date will gain unfair dismissal protection rights.

How will this change impact employees?

While this change appears positive for employees, it will require employers to place added importance on employees’ performance much earlier than they have probably done so in the past. Traditional ‘bedding-in’ periods to allow for settling in and adjusting to the ‘learning curve’ become significantly reduced, with employees needing to demonstrate that they can perform the job effectively within the first six months of employment, as employers will now need to act more quickly if they want to dismiss an employee.

Senior executives with managerial responsibilities should be aware that, as is currently the case, it will still be possible to dismiss an employee fairly after six months. Under the new rules, as is the case now, employers must demonstrate one of the five statutory ‘fair’ reasons for dismissal and follow a fair procedure. It will be increasingly important to assess and measure the employee’s performance after the initial six months of employment, in order to demonstrate clear evidence for a ‘capability’-based dismissal.

Dismissal during probationary periods

Enhanced unfair dismissal protections will mean that probationary periods and performance management processes will now be much more important than they have been in the past. Employees should expect to undergo more robust performance monitoring from the outset of their employment. In addition, the recruitment process may be more lengthy and structured, and background checks will be more critical than ever. Probationary periods of six months or longer will be largely redundant as employees will acquire unfair dismissal rights before their expiry, although continued performance management after the six month period will be crucial.

Key change 2: removal of the unfair dismissal compensation cap

At the same time as the reduction in the qualifying period, from 1 January the cap on unfair dismissal compensation awards will be removed. Currently, the award for an unfair dismissal is capped at the lower of 52 weeks’ pay or £123,543.

How is the removal of the cap advantageous for senior employees?

The removal of the cap on unfair dismissal compensation creates an opportunity for senior executives to approach exit negotiations with significantly increased ‘robustness’.

Previously, the cap meant that senior executives could often only recover a small proportion of potential losses resulting from their dismissal, often rendering it financially unviable to pursue an unfair dismissal claim. Knowing this, employers frequently initiated settlement discussions with an offer close to the amount of the cap, on the ‘bird in the hand is worth two in the bush’ approach.

Previously, it was almost always necessary to lodge a claim at the Employment Tribunal to protect the employee’s position, even when engaging in settlement negotiations. This was in part due to the formerly short three-month window for bringing a claim to an employment tribunal, which should be addressed to some extent by expanding this timeframe to six months under the act (see key change 3 below).

However, in addition to having to lodge a claim (even if you hoped to avoid doing so) for the reasons above, it was often necessary to include claims for discrimination and/or whistleblowing, where compensation was already uncapped, to strengthen the senior executive’s bargaining position for continuing settlement negotiations.

This approach was often more a matter of litigation strategy than a reflection of the central issues in dispute and undoubtedly added complexity, costs and additional polarisation to the process, sometimes rendering settlement even more difficult to achieve. Without a cap on unfair dismissal compensation, senior executives will no longer need to plead additional, likely weaker, claims when seeking uncapped compensation, simultaneously reducing legal costs and strengthening their negotiating positions.

Senior executives with managerial responsibilities

Senior executives who are also senior managers will need to ensure that they have fair and valid reasons for the potential dismissal. It will be vital for employers to work closely with HR and legal teams to ensure that executive/employee dismissals are procedurally fair and well-documented, thereby guarding against legal liability, reputational risks, and uncapped unfair dismissal awards.

What action should senior executives take to protect themselves?

Senior executives who fear that their position may be at risk should take steps now to prepare themselves to robustly challenge any attempt to dismiss them, for example, by ensuring they have evidence of good performance and good conduct, can illustrate the importance of their contribution and their role, and explain how it aligns to the future plans for their employer. In parallel, they should now prepare and take steps to ensure they are in the strongest position possible in the event of an involuntary exit.

Senior executives should also consider if making a move before these new rights take effect makes sense. Previously, an employee who left their employment would need to be in new employment for two years before they could re-acquire protection from unfair dismissal. However, from 2027 onwards, employees will only need six months to acquire the right not to be unfairly dismissed.

Key change 3: extension of time limits for most Tribunal claims from three months to six months

The increase in the tribunal time limits will double the time in which senior executives can bring a vast majority of employment claims.

What are the advantages of the extended time limits for senior executives?

As mentioned above, the extended time limits will enable senior executives to defer issuing protective proceedings until a later stage of settlement negotiations. This helps both parties avoid significant legal expenses and prevents them from becoming entangled in litigation, which often derails settlement discussions, at the outset of litigation.

Additionally, it will enable senior employees who are dealing with pregnancies or medical conditions to address their more immediate demands and issues before deciding whether litigation is the right path for their situation.

It is anticipated that this change will reduce the number of claims issued solely for protective purposes during ongoing negotiations. By allowing more time for discussions, it should encourage settlements outside the tribunal process, as parties will have a greater opportunity to resolve matters without becoming drawn into litigation.

Key change 4: improved flexible working and parental rights

The act contains a suite of rights and protections related to the work-life balance and family life of working individuals. These include:

Day 1 paternity and parental leave

• From April 2026, employees have been able to take parental leave and paternity leave from day 1 of employment. Previously, employees required one year of employment before they were entitled to parental leave, and 26 weeks before they could access paternity leave.

Day 1 right to request flexible working

• Currently, employees can request flexible working from day 1. Employers are only permitted to refuse based on specific company reasons.
• Under the act, the employer’s refusal must be ‘reasonable’, and the employer must explain in writing what their grounds for refusal are, along with why their refusal is reasonable. Currently, reasonable grounds for employers to rely on include the inability to reorganise work among other staff, incurring extra costs that will damage the company, and if the company is planning changes to the workforce.
• This change is expected to come into effect in

Enhanced protections against dismissals relating to family leave

• Currently, women who are made redundant once they inform their employer of pregnancy, or whose expected date of childbirth was less than 18 months ago, have the right to be offered suitable alternative employment.
• Under the act, the government will be able to introduce regulations protecting women against other non-redundancy dismissals too. This will also apply to adoption leave, shared parental leave, and other types of family leave.
• This change is expected to come into effect in

Day 1 right to bereavement leave

• Currently, there is no statutory right to bereavement leave for any loss other than stillbirth after 24 weeks of pregnancy or the death of a child under 18.
• Under the act, the government will introduce a day 1 right to a week’s bereavement leave, albeit unpaid.
• This change is expected to come into effect in

How will these changes impact the lives and rights of employees?

These changes will enable all employees to enjoy a greater suite of protections, aimed at alleviating some of the pressures on working families and promoting the protection of women to enable greater opportunities and diversity in the workplace, particularly at the top.

Family leave

As of December 2024, the top 20% of earners made up 60% of those who use shared parental leave. This fact hides a stubbornly low uptake percentage across all levels generally; however, that said, senior executives can and arguably should lead by example, so the enhanced protections for family leave are a welcome improvement.

What family leave protections will employees enjoy under the act?

The act’s strengthened provisions for family leave entitlements enable parents to access day 1 rights to paternity and parental leave, which are not subject to any probationary period. Additionally, enhanced protection against dismissals related to family leave will safeguard employees who take this.

It will be interesting to see whether these changes lead to a more balanced approach between men and women with families, particularly in relation to family leave. The intention behind these reforms is to promote a more equal and diverse workplace, especially at the executive level, where female representation remains limited, though progress is being made.

Flexible working and the ‘reasonable test’

Senior executives exercising managerial responsibilities should be aware that the requirement to act reasonably when deciding to refuse a flexible working request (and to explain the grounds and reasons for the decision) may create additional work for employers when managing staff. Seeking legal advice at an early stage can help avoid future workplace disputes.

Bereavement leave

Arguably, the unpaid nature of day 1 bereavement leave undermines its impact, and it is unclear how widely accessible this will be. Nevertheless, this constitutes an expansion of bereavement leave provisions for employees, to come into effect at some point in 2027. Senior employees with managerial responsibilities should stay informed about developments in this area when handling bereavement leave requests from employees.

Key change 5: enhanced protection against harassment

The act will build upon October 2024’s duty on employers to take ‘reasonable steps’ to prevent sexual harassment in the workplace by introducing further responsibilities for employers to prevent sexual harassment, including:

• requiring employers to take ‘all’ reasonable steps to prevent sexual harassment in the workplace;
• making the disclosure of sexual harassment a protected disclosure under whistleblowing protections (thereby enabling individuals to seek interim relief if they are dismissed for making sexual harassment disclosures, which is a powerful deterrent for employers);
• introducing liability for employers for all forms of harassment (not just sexual harassment) by third parties;
• if any provision or clause in any agreement (including non-disclosure agreements) prevents workers from making disclosures relating to sexual harassment, then this provision or clause will be void.

Except for the last point (which currently has no implementation date), these changes will come into effect in October 2026.

Preventing harassment is now a legal duty: what senior leaders must do

The prevention of sexual harassment is now not only a moral imperative for employers, but a legal one. Employees can expect to see more frequent mandatory anti-sexual harassment training sessions taking place in their workplaces. Employers may introduce reporting mechanisms, such as ‘speak up’ channels, alongside existing whistleblowing processes. Those in the financial services sector may already be familiar with these processes.

Navigating these additional duties will be a key focus for senior executives who are managers, as they are not only beneficiaries of these protections but also leaders of the desired workplace cultural changes. This will likely include senior executives leading strategy and training decisions, as well as managing reporting channels within workplaces.

As a word of warning, senior executives can, of course, be personally liable for acts of discrimination or harassment under the existing equality legislation.

Key change 6: fire and rehire

Currently, firing and rehiring is a lawful, albeit reputationally risky, employment practice. It was brought into the spotlight by the famous P&O Ferries scandal, where the employer deliberately and unlawfully dismissed 800 employees without any union consultations, instead opting to skip straight to compensation.

Under the act, an employer’s ability to fire and rehire or to change terms and conditions will be significantly restricted. Dismissals for refusing to accept changes to key contractual terms (eg pay, working hours, rights to annual leave) will be automatically unfair. There will be an exception if employers are acting in response to financial constraints which impact their ability to continue the company as a going concern, although this exception is likely to apply very rarely.

This change will come into effect on 1 January 2027.

How will these changes impact the lives and rights of senior employees?

Companies will encounter increased difficulty when implementing cost-saving or restructuring measures which involve altering contracts. For those senior executives who are also managers, it will be very important for them to collaborate closely with HR and legal teams to ensure compliance with these new restrictions on fire and rehire, particularly during periods of workforce changes or contract renegotiations. It is important to note that the new rules will not only apply in mass redundancy situations, or a P&O Ferries type situation, but will also apply to changes in relevant terms and conditions of individual employees, or potentially where a dismissed employee is replaced by another employee on different terms.

Key change 7: industrial relations

The act contains a suite of protections aimed at strengthening the collective voice and bargaining power of all workers, including:

• simpler recognition processes for trade unions from April 2026 (see our article summarising these changes here);
• strengthened right of access for trade unions from October 2026;
• enhanced protection for employees against dismissal for taking industrial action from October 2026;
• enhanced protection for union representatives from October 2026.

Many of these changes will extend to the wider category of workers, not just employees, meaning that a much larger group of people working for the company could be affected.

How will these changes impact the lives and rights of employees and workers?

The proposed changes will serve to strengthen trade union rights, both in accessing the workplace to carry out union activities and in communicating with workers (including digitally).

These changes will have far-reaching consequences, as some workforces may achieve union recognition for the first time. There are likely to be more trade union recognition applications as a result of the procedural simplifications. Employers can therefore expect to see increased industrial action and trade union activity. As a result, senior executives who are managers will likely need to engage more frequently and actively with trade unions and union representatives.

What can employers expect?

In light of the strengthened union rights and simplified union recognition process, employers in industries which do not typically experience union activity should now be prepared to face some. As the protections continue to be put in place, employees will be able to go on strike more easily and with less risk of retaliation (direct or indirect) from employers.

Senior executives who are leading departments should therefore proceed with caution when encountering disputes with trade unions and union representatives, seeking legal advice at an early stage to prevent issues and conflicts from resulting in legal liability or reputational risk.

Other key changes

Whilst this article has summarised the key changes and their impacts above, other changes include the removal of the lower earnings limit and waiting period to access statutory sick pay, which was introduced in April, and the banning of zero-hours contracts (expected in 2027).

To view a complete list of the proposed changes under the act, access the government’s roadmap here, or view our Employment Rights Act hub and timeline here.

Final thoughts

The act will, as promised, introduce many significant reforms to UK employment law and provide strengthened protections for working individuals. The employment team is ready to support senior executive clients as they adapt to these changes, both as beneficiaries of enhanced protections and as leaders driving the necessary workplace changes.

It is essential to note that many of the changes to be brought in by the new act remain subject to further consultations, which will take place throughout 2026 and beyond. Strong opinions from both employers and employees will undoubtedly be voiced throughout the consultation stages. Employers and employees at all levels must stay updated on the developments of regulations introduced under the act over the coming months and years.