The Employment Rights Act 2025

All change please – the Employment Rights Act

The Employment Rights Act 2025 (‘ERA’) is one of the most significant changes ever to employment law.

The Government has heralded the legislation as bringing the “world of work into the 21st century” and has estimated that over 15 million employees will benefit from new employment protection rights.

The changes are being implemented over a 2 year period, starting in April 2026.

There are numerous changes and this article only focuses on those which, in the writer’s opinion, will be most relevant to SMEs.

In April 2026

Statutory Sick Pay

SSP will now be payable from day 1 of an employee’s absence. The current 3 day waiting period will be abolished, as will the lower earnings limit. This means that all employees will be eligible for SSP, regardless of their earnings.

The Government has estimated that SSP will extend to over an additional one million employees.

Aside from increased payroll costs, employers should review and update their sickness policies. It is too early to say whether the changes will increase the level of absenteeism, but this must be a possibility.

Day One Employment Rights

Day one means what it says on the tin!

The ‘waiting period’ to gain certain rights will be abolished.

From the very first day of their employment, an employee will have a statutory entitlement to the following:

• Unpaid paternity leave
• Unpaid parental leave

In addition, a new right has been created – that of unpaid bereavement leave, which will apply to pregnancy loss and the loss of a member of an employee’s family.

Day one rights are, in fact, not new.

Since 2024, an employee has had the right to apply for flexible working on day one. Similarly, certain dismissals (for example, for raising a health and safety complaint or alleging that an employer has breached an employment protection right) are deemed to be automatically unfair, irrespective of the employee’s length of service.

Note that an automatically unfair dismissal does not mean that an employee will succeed in their claim. They still have to prove the reason for their dismissal was one that qualified for protection.

Extended whistleblowing protection

Whistleblowing claims are on the increase.

Whistleblowing protection arises when an employee has raised or reported a wrongdoing by their employer (such as criminal activity).
An employee who is dismissed for whistleblowing will gain extra protection, as sexual harassment will now be included in the scope of whistleblowing protection.

In short, if an employee claims that they have been subjected to sexual harassment and is dismissed as a result, the dismissal will be automatically unfair, regardless of their length of service.

Expected changes from October 2026

Fire – rehire

It will become automatically unfair (unless an employer is in serious financial difficulty) to dismiss an employee and then re-hire on new (often less favourable terms). Currently, this practice is lawful and enables an employer to change terms and conditions by giving notice of termination and, on expiry of the notice period, immediately rehire the employee on new terms. The practice is useful since it can be used in circumstances where an employer has tried all other ways to negotiate a variation to an employee’s contract.

Sexual harassment

Since October 2024, employers have been liable for sexual harassment to an employee caused by a third party (such as a customer). A defence is available if the employer can prove that they took reasonable steps to prevent the harassment. Under the ERA, however, the defence will become harder to satisfy and an employer will have to prove that they took all reasonable steps. This will place a higher duty on employers.

Employers should consider what steps they need to take to fall within the defence. This could include undertaking a risk audit or amending standard supplier contractual terms outlining a zero tolerance position on harassment.

Protection against third party harassment will be extended from sexual harassment to all types of harassment on the grounds of a protected characteristic (such as age, disability, race, religion and sex).

Businesses which are public facing – for example, leisure and retail are likely to be most at risk.

Fundamental changes will be introduced in 2027, most likely, from January

Unfair Dismissal

Currently, save for certain, limited, exceptions where a dismissal is deemed to be automatically unfair, an employee must have two years continuous service with the same employer to be protected from unfair dismissal. Note, however, that this is slightly misleading as an employee with just less than two years service can ‘add on’ their statutory notice of one week to take them over two years.

When the law changes, an employee will only need six months service to claim unfair dismissal – a massive change, and one which will have a significant impact on employers.

Currently, many probationary periods of employment are set at six months. If an employee ‘fails to meet probation’ then they can be fairly dismissed. However, once the law changes, a dismissal at six months will enable the employee to claim unfair dismissal.
Employers should therefore carefully review their probationary periods and reduce them – say to three or four months. Further, those employers taking on new members of staff in the summer need to be aware that those employees will gain unfair dismissal protection early in the new year.

Unfair Dismissal – compensation

Currently, the maximum compensatory award that an employee can recover is subject to a statutory cap – one year’s salary, or £123,543 whichever is the lower.

The cap is to be abolished, enabling employees to, effectively, recover uncapped compensation representing the full extent of their loss.

With unfair dismissal claims often taking two years to reach an employment tribunal hearing, this change will significantly impact on an employer’s risk. It may also encourage highly paid employees to bring claims, rather than to enter into settlement agreements.

Unfair Dismissal – time limits

Currently, an employee has to issue a claim for unfair dismissal within three months of the date of dismissal. This gives an employer certainty – if nothing is heard, then an employer can, usually, assume that no claim is to be brought.

The ERA plans to extend the time limit to six months, thus causing greater uncertainty.

So, to summarise, employers will face a ‘triple whammy’ – a reduction in the qualifying period for unfair dismissal claims, a removal of the ‘compensation cap’ and extended time limits.

Trade Union Rights

Employees already have the right to join a trade union. However, the ERA will require employers to become more proactive by placing a duty on them to inform employees, in writing, of their right to join a trade union of their choosing.

Zero hours contracts

These contracts are common in many sectors. Under the ERA, employees will have the right to request guaranteed working hours.
In practice, this will place an obligation on an employer to offer an employee guaranteed hours. This will be based on a proposed reference period of a 12 week period worked by the employee.

Further, employees will have the right to receive reasonable notice of a proposed workshift as well as changes to, or cancellation of, a shift.

Redundancy consultation

If an employer is proposing to make 20 or more redundancies at an individual workplace, there is an obligation to collectively consult with either a trade union (if recognised by the employer) or workers representatives. The ERA will broaden the scope of consultation as a proposal to make 20 or more redundancies will apply to the whole organisation, not just one workplace.

Pregnancy

It is proposed that it will be automatically unfair to dismiss an employee within a period of 6 months of their returning to work following maternity leave. Certain defences may be allowed, such as redundancy.

If you would like to know more about how these changes will affect your business, please feel free to get in touch