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Employment Rights Act 2025: The Key Employment Law Changes Employers Need on Their Radar
Adrian Fryer
After months of parliamentary debate, the Employment Rights Bill has finally cleared the House of Lords and gained Royal Assent on 18th December 2025. It has now become the Employment Rights Act 2025 (ERA 2025) – a landmark reform that will reshape UK employment law over the coming years.
While many of the changes will not take effect immediately, employers should now be clear on the direction of travel. The focus should shift from what might happen to how and when to prepare.
The two changes employers are watching closely
Two late amendments made during the Bill’s final passage are particularly significant.
First, the qualifying period for ordinary unfair dismissal will reduce from two years to six months, rather than being removed entirely. This change is expected to take effect from January 2027.
Second, and potentially more impactful, the compensation cap for unfair dismissal — currently the lower of one year’s salary or £118,223 — is expected to be abolished, subject to the Government completing and publishing an Impact Assessment. If confirmed, this will substantially increase litigation risk and exposure for employers.
A phased introduction
ERA 2025 will be implemented gradually under a government roadmap.
The only immediate change following Royal Assent has been the repeal of the Strikes (Minimum Service Levels) Act 2023.
Further industrial relations reforms will follow two months later, including simplified industrial action ballots and notices, stronger protection against dismissal during strikes, and the repeal of much of the Trade Union Act 2016.
From April 2026, employers will start to see more practical, day-to-day changes, such as:
- Day-one rights to paternity leave and unpaid parental leave
- Reformed Statutory Sick Pay (no waiting days or lower earnings limit)
- Expanded whistleblowing protection, including sexual harassment complaints
- Higher penalties for collective redundancy failures
Additional reforms are planned for October 2026, including tighter controls on fire-and-rehire practices, stronger rules on tips, expanded trade union rights, and a new duty to take “all reasonable steps” to prevent sexual harassment.
Beyond that, 2027 is expected to bring the aforementioned unfair dismissal changes, reforms covering flexible working, bereavement leave, protections for pregnant workers, restrictions on zero-hours arrangements, and regulation of umbrella companies
What should employers be doing now?
For unionised employers, the priority is understanding the imminent changes to industrial action rules and reassessing risk and response planning.
For non-unionised workplaces, preparation should focus on:
- Reviewing contracts, variation clauses and probationary provisions
- Strengthening probationary processes ahead of the six-month unfair dismissal threshold
- Training managers on upcoming rights and obligations
- Planning policy updates for family leave, sickness absence and harassment
- Auditing payroll and benefits systems in light of SSP reform
The takeaway
ERA 2025 is not a single moment of change but a rolling programme of reform. Employers that start planning early – rather than waiting for implementation dates – will be best placed to manage risk, cost and disruption as the new framework takes shape.