Employment Rights Act– What Does It Mean For Employers?

Unfair dismissal

• The two-year qualifying service requirement for unfair dismissal claims will be reduced to six months
• The cap on compensation for unfair dismissal claims will be removed

• All employees will have the right to claim unfair dismissal after six months of employment. This is a change from the current position where employees only have unfair dismissal protection after two years' service.
• Currently compensation for unfair dismissal is capped at the lower of one year's pay and £118,223 (a figure which is revised each year). Under the Act, the cap will be removed so there is no limit on the amount that can be awarded (as is the case for discrimination and whistleblowing claims).

• The Government had previously said it would make unfair dismissal a 'day one' right but will now instead introduce a six-month service requirement.
• This is still a significant change meaning that many more employees will have unfair dismissal rights than was previously the case.
• The removal of the cap on compensation is also incredibly significant and will mean unfair dismissal claims become more costly. It will also make settling claims and resolving senior exits more difficult.
• In the light of these changes, it will be important to ensure that all new starters have a probation period in their contracts and that there is a process in place to ensure that the employee's performance is regularly reviewed during this time.
• More widely, employers will need to review disciplinary and dismissal policies and processes and ensure that managers are trained on managing conduct and performance issues.

January 2027

Harassment at work

• Strengthening of the duty to take reasonable steps to prevent sexual harassment at work
• Whistleblowing protection for sexual harassment complainants
• Ban on confidentiality provisions preventing discussions of discrimination or harassment
• Introducing protection from third party harassment

• The new duty to take reasonable steps to prevent sexual harassment at work (in force from 26 October 2024) will become a duty to take "all" reasonable steps to prevent sexual harassment. Regulations will specify the steps that employers should take, such as carrying out risk assessments and implementing harassment policies and complaints procedures.
• A complaint of sexual harassment at work will be treated as a protected disclosure under whistleblowing legislation.
• Confidentiality provisions and NDAs will not prevent employees from discussing allegations of discrimination or harassment
• Employers will be liable for harassment (of any kind) by third parties, such as clients or suppliers, unless they take reasonable steps to prevent it.

• Employers which have put in place reasonable steps to prevent sexual harassment at work in order to comply with the October 2024 duty should be in a good position when this duty is increased, although it is important to review all anti-harassment measures regularly in any event.
• The new whistleblowing protection for employees who complain of sexual harassment means that if they are dismissed or subjected to a detriment in connection with their complaint they will have a whistleblowing claim in addition to victimisation (and therefore could claim interim relief).
• The proposed ban on confidentiality provisions may be a disincentive to employers (and potentially also to employees) to enter into settlement agreements.
• The new third party harassment provision will extend to all types of harassment, and employers will need to ensure that they have measures in place, such as appropriate wording in contracts with clients and suppliers.

October 2026

Flexible working

• Strengthening flexible working by making it harder for employers to refuse requests

• Employers will still be able to refuse flexible working requests on specified business grounds but there will be a new requirement for any refusal to be "reasonable".
• Employers rejecting a flexible working request will have to state the grounds for refusal and explain why the rejection is reasonable.
• Employers must consult with the employee before refusing a flexible working request. The Government will, subject to consultation, set out in regulations steps that employers must follow as part of this consultation requirement.

• The Government pledged to make flexible working the default for all roles with employers required to accommodate this as far as is reasonable.
• The changes in the Act stop short of this as employers will continue to be able to refuse flexible working requests on specified business grounds. The new requirement for the refusal to be reasonable may have a limited impact but it remains to be seen how this will be interpreted by tribunals and government guidance.
• The Government plans to consult on the steps employers will be required to follow in order to comply with the obligation to consult with an employee before refusing a request.
• Employers will need to review their flexible working policies and practices in the light of the changes, and ensure managers receive training in how to handle flexible working requests.

2027

Family rights

• Paternity leave and unpaid parental leave will become a day one right
• Protection from dismissal during pregnancy, or maternity or adoption or shared parental leave or within six months of returning to work
• New right to bereavement leave

• The current qualifying periods for paternity leave (26 weeks) and unpaid parental leave (one year) will be removed, so that employees will be able to take leave from day one.
• Employees will be able to take paternity leave following shared parental leave (currently if an employee takes shared parental leave, they lose the right to take paternity leave)
• Dismissal of employees during pregnancy, or maternity, adoption or shared parental leave, or within six months of their return to work will be unlawful, except in certain circumstances (to be set out in future regulations).
• Parental bereavement leave (which was introduced in April 2020) will be extended to cover other family bereavements. This will give employees the right to at least one week of bereavement leave following the death of a family member (the detail of which family members are covered will be set out in regulations). It is intended that this will also cover pregnancy loss.

• Removal of the qualifying periods for paternity and unpaid parental leave will entitle many more employees to take these types of leave. However, since paternity leave is for a maximum of two weeks, and many employees do not take parental leave because it is unpaid, it seems unlikely that there will be a significant impact on employers from this change.
• Employers will need to ensure they have appropriate processes and training in place to ensure that they do not unlawfully dismiss employees who are on or recently returned from family leave.
• Many employers already offer some form of family bereavement leave, and an increasing number have policies covering pregnancy loss. Employers who do not have such policies in place should take steps to introduce these in preparation for the new leave rights.

April 2026 - day one paternity and unpaid parental leave

2027 - dismissal protection and bereavement leave

Fire and rehire

• Restricting the use of fire and rehire

• It will become automatically unfair to dismiss an employee for refusing to agree changes to their employment contract where the change relates to pay, pension, hours of work, holiday entitlement or anything else set out in regulations.
• It will also be automatically unfair to dismiss an employee where the main reason is to replace them with someone else, or re-engage them, on new terms relating to pay, pension, hours of work, holiday entitlement or anything else set out in regulations.
• Dismissing an employee in order to replace them with someone who is not an employee (e.g. an agency worker or self-employed contractor) will also be automatically unfair unless the employer has a reduced need for such employees.
• There will be a limited exception to all of the above where the change is in response to financial difficulties likely to affect the ability of the business to continue as a going concern and the change could not reasonably have been avoided.

• This is a significant change as it means employers will have much less flexibility when seeking to change terms and conditions of employment and a significantly higher onus of showing the need for the change. It may also lead to additional redundancies given the limited scope for employers to force through changes to terms and conditions.
• The changes will also make it more difficult to replace employees with contractors or agency workers for purely cost reasons
• Employers should ensure that employment contracts are drafted so that they contain as much in-built flexibility as possible.

October 2026

Collective redundancy consultation

• Expanding the collective redundancy consultation requirements and increasing the penalties for non-compliance

• The current threshold for collective redundancy consultation is where an employer proposes 20 or more redundancies within a 90-day period at a single site or establishment.
• This threshold will continue to apply but a new additional threshold will be introduced based on the number of redundancies across the employing entity as a whole. The additional threshold is yet to be determined but could be a percentage of the workforce or a specified number of redundancies. Whatever the case, the threshold will continue to apply per employing entity (rather than across the group).
• The maximum penalty for breaching the collective redundancy consultation requirements will also increase from 90 days' pay to 180 days' pay per affected employee.

• The additional threshold for collective redundancy consultation will mean the collective consultation duty is triggered more easily and more frequently.
• Employers will need processes in place to track redundancies and changes to terms and conditions, not only on a site-specific basis, but also across the entire business.
• The increase in the maximum penalty means the costs of failing to inform and consult properly on large scale redundancies will increase significantly.

April 2026 – increase in protective award

2027 – new collective redundancy threshold

Equality reporting

• Requiring large employers to publish menopause and gender pay gap action plans
• Requiring large employers to publish ethnicity and disability pay gap figures

• Employers with 250+ employees will be required to produce a gender pay gap action plan to accompany their gender pay gap reports.
• Employers with 250+ will also be required to produce action plans on how they support employees through the menopause.
• Details of the requirements will be set out in regulations.
• While not contained in the Act, the Government also plans to require employers with 250+ employees to report on their ethnicity and disability pay gaps.

• The devil will be in the detail as the Government plans to set out in regulations the content and form of such action plans and how they are to be published.
• Employers may wish to consider what narrative they already publish or could publish alongside their gender pay gap figures and how this could form the basis of the gender pay gap action plan.
• Employers who do not have a menopause policy may consider introducing one.

April 2026 – voluntary action plans

2027 – compulsory action plans

Zero hours / casual / irregular hours workers

• Zero/low hours workers will have a right to be offered a contract reflecting regular hours
• Zero/irregular hours workers will be given a right to notice of shifts and compensation for cancellation

• The new right to a contract will apply to workers on a zero hours contract/arrangement or a contract with minimum guaranteed hours.
• If the worker's hours regularly exceed the zero/minimum hours over a 12 week reference period, then they will have to be offered a new contract reflecting regular hours.
• Employers will be required to give zero hours workers and irregular hours workers reasonable notice of shifts which the worker is either required or requested to work, as well as reasonable notice of cancellations or changes.
• Workers will be entitled to receive a set payment where a shift is cancelled, changed or curtailed, at short notice.
• These rights will also cover agency workers, with the hirer having responsibility for offering regular hours contracts, and the agency being liable for shift cancellation payments.
• The thresholds for minimum hours and notice periods, and the amount of the cancellation payment, will all be subject to future consultation.

• Zero hours contracts are not being banned (contrary to some previous reports) but the new laws aim to ensure that zero hours or casual workers who in practice work fairly regular hours, can have a contract which reflects this. Also, all such workers will have increased reliability and certainty around their working arrangements.
• Employers who rely heavily on casual or zero hours workers may wish to review their arrangements to assess which workers may be entitled to a regular hours contract. Also if shifts are usually offered at short notice and/or regularly cancelled or curtailed, then it would be advisable to assess how this may be improved, to reduce the exposure to compensation when the changes come into force.

2027

Pay, holiday and sickness

• Statutory sick pay to be available to all workers, with no waiting period and no earnings threshold
• Minimum wage to reflect cost of living and apply from age 18
• New duty on employers to keep holiday records

• The current three-day waiting period for statutory sick pay (SSP) will be removed, so that it is available from day one. The earnings threshold will also be removed so that SSP is available to all workers regardless of their earnings. SSP will be set at 80% of average earnings for workers who earn below the statutory rate of SSP.
• The Low Pay Commission will take into account the cost of living when setting the rates of the National Living Wage and the National Minimum Wage, and the age bands will be removed, so that the same rate applies to all workers aged 18 or above.
• Employers will be required to keep records showing compliance with the rules on statutory holiday entitlement and pay for at least six years. Failure to do so will be a criminal offence.

• There will be an increase in wage bills, in that a greater number of workers will qualify for SSP and the National Living Wage (which itself may increase to reflect the cost of living).
• Employers should also review their sick pay policies and contractual provisions on statutory sick pay.
• Employers should also review their records on holiday and holiday pay to ensure they can demonstrate compliance. Employers will have flexibility in how such records are kept. However, this may be more complex where additional elements such as overtime or commission must be included in holiday pay calculations.

April 2026 – statutory sick pay changes

Enforcement

• Increasing time limits for Employment Tribunal claims
• Establishing a new single enforcement body for workers' rights

• The time limit for workers to bring claims in the Employment Tribunal will increase from three to six months
• A new Fair Work Agency will be established to enforce workers' rights.
• The Fair Work Agency will bring together the work of existing agencies and enforce rights such as holiday pay, statutory sick pay, national minimum wage, unpaid tribunal awards and other duties such as the new holiday recordkeeping duty (see above).
• The Agency will also have wide-ranging powers, including to require information, enter premises, enforce holiday pay and SSP, issue penalties, bring claims on behalf of workers and recover enforcement costs.

• With the increase in Tribunal time limits, it will be interesting to see if employers face an increase in Tribunal claims – ironically, some employees may be less likely to claim because they have more time to find another job or otherwise move on.
• The Fair Work Agency will make it easier for workers to enforce their rights and will be welcomed by workers and trade unions. It will have significant powers and much will depend on how they are used in practice. The power to enforce holiday pay is potentially significant – this is a complex area and one which is not often litigated currently but this may change under the Agency.

April 2026 – new Fair Work Agency

October 2026 – extension of Tribunal time limits

Trade unions and strikes

• Strengthening the rights of trade unions

• The strike ballot and notice requirements will be relaxed, and electronic balloting will be introduced.
• Recently introduced legislation on minimum service levels during industrial action will be repealed.
• The trade union recognition process will be simplified and the thresholds reduced.
• Employers will have a new duty to inform workers of their right to join trade union, to be included in the employment contract/statement of particulars.
• Trade unions will be given new rights to request access agreements from employers to allow access to the workplace for recruitment and organising purposes.
• The rights of trade union representatives, learning representatives and equality representatives will be enhanced.
• Sector wide collective bargaining will be introduced in the social care (and possibly other sectors in the longer term) and the School Support Staff Negotiating Body will be re-established.
• Workers will receive stronger protection from blacklisting for trade union activity.

• The Government's plans are likely to mean trade unions will have a much greater role to play in employee relations. As a minimum, they will mean it is easier for trade unions to call strikes (and other industrial action) and harder for employers to manage strikes. They will also mean it is easier for trade unions to seek recognition.
• If sector wide collective bargaining is introduced in future in sectors beyond social care, this could lead to a real change in the employee relations landscape.
• Employers will need to update employment contracts to refer to the right to join a trade union.
• Employers may also wish to review any employee consultative arrangements they currently have or could put in place, and consider how likely future requests for trade union recognition might be.

December 2025 – repeal of minimum service levels

February 2026 – ballot and notice requirement changes

April 2026 – electronic balloting and simplifying recognition process

October 2026 – duty to inform employees and right of access