EPL insurers' at a glance guide to the Employment Rights Act 2025

Measure

The government had originally proposed to make protection from unfair dismissal a "day one" right by repealing the current requirement for an employee to have two years' service to claim ordinary unfair dismissal. However, following persistent pressure from the House of Lords during the passage of the ERA 2025 through parliament, the government dropped this proposal. Instead, the ERA 2025 provides for a six month qualifying period for unfair dismissal protection.

In addition, the statutory cap on unfair dismissal compensatory awards (which is currently set at the lower of 52 weeks' pay, or £118,223) will be removed.

Impact

It will become more difficult for employers to dismiss employees with 6 or more months' service due to the need to identify a fair reason and follow a fair process.

Employers are also likely to face more (and more expensive) unfair dismissal claims, particularly as the removal of the cap on the compensatory award gives employees a greater incentive to litigate.

Timing

The government intends to introduce regulations in 2026 to bring the six month qualifying period into force on 1 January 2027. Anyone with six months' service as at that date would then have the right not to be unfairly dismissed.

We expect the cap on the compensatory award to be abolished on the same date.

Measure

Collective consultation is currently required where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a 90 day period. This threshold will remain in place, and a different, higher threshold for collective consultation is to be added where employees are to be made redundant at more than one establishment (effectively, aggregating dismissals across establishments). Further details will be set out in regulations.

(Note that the definition of redundancy for these purposes is broader than the ordinary use of the term – it also covers dismissal and re-engagement to make changes to terms and conditions, i.e. fire and rehire.)

The maximum amount of a protective award that can be made for breach of collective consultation requirements will double – from 90 to 180 days' pay per affected employee – although employment tribunals will continue to have discretion to vary the amount of the award.

Impact

Much is yet unknown about how the trigger for collective consultation will operate for multi-establishment redundancies. It may be difficult for large multi-site employers in particular to keep track of proposed dismissals across their various sites to identify when they hit the new threshold. There will therefore be a greater risk of claims, including for inadvertent breaches.

Claims for breach of collective redundancy consultation requirements will become much more expensive due to the doubling of the maximum protective award.

Timing

The doubling of the maximum protective award is anticipated to take effect in April 2026,

Changes to the collective consultation threshold are expected to take effect in 2027.

Measure

Automatic unfair dismissal: restricted variations

It will become automatically unfair to dismiss an employee for refusing to agree to a change to their terms and conditions of employment (fire and rehire) if the change constitutes a "restricted variation", or to dismiss an employee and hire another employee on amended terms to carry out the same or substantially the same work (fire and replace), if the amended terms involve a "restricted variation". Broadly speaking, restricted variations are changes to pay, pensions, hours of work, or time off, or the inclusion in an employment contract of a unilateral flexibility clause regarding any of these. Regulations may specify other types of restricted variation.

There will be a very narrow exception if the employer can demonstrate that the change in terms was necessary to alleviate serious financial difficulties that were likely to affect the ability to run the business as a going concern, and could not reasonably have been avoided. If the exception applies, the tribunal will have to assess (ordinary) fairness with regard to specified factors.

Ordinary unfair dismissal: non-restricted variations

Dismissing an employee for failure to agree a change to their terms that is not a "restricted variation" will not be automatically unfair. However, when assessing whether or not it is an (ordinary) unfair dismissal, the employment tribunal will be required to have regard to specified factors.

Automatic unfair dismissal: replacing employees with non-employees

It will be automatically unfair to dismiss an employee where the reason (or principal reason) for dismissal is to enable the employer to replace the employee with an individual who is not an employee (such as an agency worker, or a self-employed contractor) doing the same or substantially the same work, unless there is a redundancy situation. The same very limited exception for serious financial difficulties that applies in respect of fire and rehire/fire and replace for restricted variations (see above) also applies here.

Impact

Given the narrow nature of the financial difficulties exception, this provision will significantly increase the risk of claims where an employer seeks to use dismissal to make a change to employees' terms and conditions to which the employees are unwilling to agree.

Potential financial exposure is significant, particularly where the number of employees in scope of the employer's proposed changes is high enough to trigger collective consultation requirements (see above).

Timing

Expected to take effect in October 2026.

Consultation has been delayed until 2026; it was initially expected in autumn 2025.

Measure

Employers will be required to prevent harassment of their workers by third parties (covering not just sexual harassment, but all types of harassment under the Equality Act 2010). The employer will be liable if a third party harasses an employee in the course of their employment with the employer, and the employer failed to take all reasonable steps to prevent the third party from doing so.

Impact

Employers do not have control over the actions of third parties such as suppliers, clients, contractors, etc. so the imposition of legal liability in the event that such a third party harasses an employee is a significant risk.

Timing

Expected to take effect in October 2026

Measure

The duty to prevent sexual harassment at work will be strengthened, requiring employers to take “all reasonable steps” to do so (as opposed to simply “reasonable steps”, as has been the case since the preventative duty came into force on 26 October 2024). Regulations will set out examples of what could constitute "reasonable steps".

Impact

Failure to comply with the preventative duty can lead to 25% uplift in compensation where an employee succeeds in a sexual harassment claim. Extending the preventative duty to require "all reasonable steps" dramatically increases the compliance risk for employers. As well as financial cost, there is potential reputational impact if the media reports that an employer has failed to comply.

Timing

Expected to take effect in October 2026

The Regulations setting out steps regarded as reasonable will only take effect in 2027 to allow time for a consultation on them on a date yet to be stipulated by the government.

Measure

Disclosure of a concern about sexual harassment will amount to a protected disclosure for the purposes of whistleblowing protection.

To qualify for whistleblower protection, a worker who makes a disclosure must reasonably believe that they are acting in the public interest and that the disclosure tends to show one of a number of specified types of wrongdoing. The ERA 2025 adds sexual harassment to the list of relevant wrongdoings.

Impact

A disclosure about sexual harassment could already be covered by the existing list of wrongdoings – for example, it could be a criminal offence, a failure to comply with a legal obligation, or a health and safety issue. However, explicitly providing for such disclosures to be protected will improve employee awareness of whistleblowing protections and may increase the likelihood of claims.

Timing

Expected to take effect in April 2026

Measure

The use of NDAs concerning discrimination and harassment in contracts with workers will effectively be banned. Any term in an agreement between an employer and a worker (such as a settlement agreement, or an employment contract) will be void if it seeks to prevent the worker from alleging, or disclosing information about:

• Harassment or discrimination
• The employer's response to such harassment or discrimination
• The employer's response to the making of the allegation

All types of harassment and discrimination under the Equality Act 2010 will be covered, and the prohibition will apply both where the worker themself is a victim of discrimination or harassment and where they are a witness to discrimination or harassment.

Regulations will set out circumstances in which NDAs concerning relevant discrimination or harassment can be used. These permitted NDAs will be referred to as "excepted agreements". A government impact assessment suggests that this may include NDAs which a worker has requested. The government intends to consult before producing regulations.

Impact

Much will depend on how an "excepted agreement" is defined. However, this provision has been criticised as being likely to lead to more litigation. There is less incentive for employers to settle potential harassment/discrimination claims if they will not be able to require the worker to keep details confidential. In some cases, defending the claim may be considered preferable from a reputational perspective.

Timing

The government has not specified an intended implementation date but we anticipate late 2026 or during 2027.

Measure

The limitation period for employment tribunal claims will be increased from three months to six months.

Impact

A doubling of the limitation period is likely to result in an increase in the number of claims being brought, as employees have more time to prepare and file their claim. The employment tribunal system is already under-resourced, and an increase in the number of claims is likely to lead to greater delays in claims being heard. This may make claims harder to defend, e.g. if key witnesses can no longer accurately recall events, or if they leave the business in the intervening period.

Timing

Expected to take effect in October 2026

Measure

Employers will be required to offer contracts for a guaranteed number of hours to zero-hours workers and low-hours workers. The number of hours to be offered will have to reflect the number of hours that the worker regularly works during a reference period. (There will be a consultation about the appropriate length of the reference period over which guaranteed hours must be assessed, before regulations relating to this provision are made.) Offers will have to be made at the end of every reference period, until the worker no longer qualifies as a zero or low hours worker. Anti-avoidance provisions prevent employers from limiting a worker's hours during the reference period in order to reduce the amount of hours they must provide in a guaranteed hours offer, or to get out of making a guaranteed hours offer altogether.

It will be automatically unfair to dismiss an employee if the sole or principal reason for dismissal concerns various rights relating to guaranteed hours offers, (including, for example, dismissal for accepting or rejecting a guaranteed hours offer, or for bringing proceedings in respect of or making a good faith allegation of a breach of the guaranteed hours offer provisions), and workers will be protected from being subjected to a detriment relating to such offers.

Employers will also be required to provide such workers with reasonable notice of shifts, and of cancellations or changes to scheduled shifts, as well as compensation for cancelling or changing shifts at short notice. Note that 'low hours' for these purposes is yet to be defined (though it has been indicated that this will not be lower than 4 hours). Workers will be protected from detriment in relation to the rights around notice of shifts and compensation for short notice cancellation/changes.

Impact

These provisions are fiendishly complicated. Failure to comply, or dismissing or subjecting an employee to a detriment in relation to these rights, will give rise to potential tribunal claims.

In practice, these provisions may result in a reduction in employers' use of zero and low hours contracts, because the complexity of the requirements will make it less attractive for employers to operate such contracts.

Timing

Expected to take effect in 2027. Consultation was due to begin in autumn 2025 and is now expected in early 2026.

Measure

Following consultation in late 2024, the government decided to extend the above provisions on zero and low hours contracts (guaranteed hours offers and notice of shifts) to agency workers.

The end hirer will be responsible for making an offer of guaranteed hours to its agency workers, as end hirers are considered to be best placed to forecast and manage the flow of future work. Where work is genuinely temporary, end hirers will be able to offer temporary contracts. Offers must (subject to limited exceptions) be no less favourable than those the agency worker had previously been working under. In addition, terms relating to pay must be no less favourable than either the agency terms or the terms of comparable directly engaged workers doing broadly similar work.  Regulations will also allow for the obligation to make a guaranteed hours offer to be placed on the agency in certain circumstances.

Responsibility for providing an agency worker with reasonable notice of shifts, shift cancellations and changes to shifts will sit with both the end hirer and the agency, but responsibility for making payments to workers where shifts are cancelled, moved or curtailed at short notice will rest with the agency – since the worker will already be on the agency's payroll. In the case of pre-existing contracts (entered into before or within the two-month period after the ERA 2025 was passed) agencies will be permitted to recoup these costs to the extent the hirer was responsible. Thereafter, the parties are expected to provide in their contracts for how they wish such costs to be apportioned.

Impact

Although the provisions allow end hirers to offer temporary contracts where work is genuinely temporary, businesses remain concerned about the impact of these provisions on temporary work, and the extent to which they will limit employers' ability to use flexibly engaged agency workers to meet unpredictable demands.

Failure to comply will give rise to potential tribunal claims against the agency and/or the end hirer.

In practice, these provisions may result in a reduction in the use of agency workers, since the flexibility currently offered by such arrangements will no longer be available.

Timing

Expected to take effect in 2027. Consultation was due to begin in autumn 2025 and is now expected in early 2026.

Measure

Employers will be prohibited from dismissing an employee who is pregnant, is on maternity leave, or has returned from maternity leave within the past six months, except in certain specified circumstances. The ERA 2025 does not indicate what those circumstances will be (details will be set out in regulations). The consultation on this provision suggests potentially significant limitations on the potential to dismiss pregnant employees and new mothers for conduct, capability, redundancy and some other substantial reason.

The ERA 2025 also gives the government power to make regulations:

• regarding procedures to be followed in relation to such dismissals and the consequences of failure to comply with such procedures;
• extending equivalent protection to employees who are on or returning from other forms of family-related leave.

Impact

A prohibition on dismissing pregnant employees / returning mothers could significantly limit employers' ability to manage their workforce –in particular if conduct, performance or redundancy dismissals are restricted.

Level of risk and practical impact will depend on breadth of circumstances in which dismissals remain permitted, and difficulty of complying with any required procedures.

Timing

Consultation closes on 15 January 2026. Draft regulations are expected to be published once the government has considered the consultation responses. 

Changes expected to take effect in 2027.

Measure

Employers will only be able to refuse a flexible working request if they can show that the refusal (for one of the eight permitted business reasons, such as burden of additional costs, detrimental impact on performance, etc.) is reasonable. This is a change from the current law, under which employers must simply base their decision on correct facts.

Impact

Introducing a reasonableness test for refusal of a flexible working request will shift the dynamic and make it harder for employers to refuse such requests. Employees whose requests are refused may be more likely to bring claims.

Timing

Expected to take effect in 2027, with consultation on the process employers will have to follow when handling requests due to begin in early 2026.

Measure

Statutory rights to paternity leave and unpaid parental leave (which are currently subject to continuous service requirements of six months and one year, respectively) will be made available from day one of employment. The current requirement for paternity leave to be taken before shared parental leave will be removed.

Impact

Expanding access to paternity leave and unpaid parental leave will have limited impact (especially as access to statutory paternity pay will remain subject to a six month continuous service requirement).

Timing

Expected to take effect in April 2026

Measure

Under current rules, SSP is only payable from an employee's fourth day of sickness absence, and employees are only eligible if they earn at least the lower earnings limit (£125 per week). The ERA 2025 broadens rights to SSP by making it payable from the first day of sickness absence and removing the lower earnings limit for eligibility.

For employees earning below the lower earnings limit, SSP will be payable at the normal rate or 80% of their normal weekly earnings – whichever is lower. 

Impact

For employers that provide enhanced company sick pay, these changes are likely to have minimal impact, as company sick pay is usually payable from the first day of sickness.

However, employers that only provide statutory sick pay are likely to face increased costs, and an increase in short-term sickness absence, as employees won't lose out on (as much) pay if they take a day or two off sick.

Timing

Further substantive regulations required, but these changes are expected to take effect in April 2026.

Measure

A day 1 statutory right to at least one week of unpaid bereavement leave on the death of a close relative or pregnancy loss before 24 weeks (including IVF embryo transfer loss) will be introduced. (The current day one right to two weeks' paid parental bereavement leave on the death of a child under the age of 18 or the loss of a pregnancy after 24 weeks will remain in place.)

The consultation on the operation of the new right to bereavement leave considers questions of eligibility for bereavement leave, its duration and when it should be taken, and any notice and evidential requirements that might be applied.

Impact

As statutory bereavement leave will be unpaid, its direct financial impact on employers will be limited. However, some of the proposals put forward in the consultation, such as the potential for the length of leave to depend on the nature of the employee's relationship to the deceased, or the ability for employees to take the leave in discontinuous blocks, may involve a greater administrative burden than employers had envisaged based on the original proposal in the ERA 2025. If the new right is tricky to administer, there may be an increased risk of claims where employers inadvertently get it wrong.

Timing

Expected to take effect in 2027.

Measure

Employers who are required to report on their gender pay gap will have to produce gender equality action plans alongside their gender pay gap report. Action plans will have to address what the employer is doing to address the gender pay gap and how it supports employees going through the menopause.

Impact

Employers who currently limit their gender pay gap reporting to the bare minimum legal requirement should consider what their action plan might look like in preparation for when this requirement takes effect.

Timing

Expected to take effect in 2027 (with introduction on a voluntary basis from April 2026).

Measure

The ERA 2025 repeals key provisions of the Trade Union Act 2016, meaning (among other things) that industrial action ballot notices will be simplified and the length of notice that unions will have to give before taking industrial action will be reduced. It also increases legal protections from detriment and dismissal for workers who take protected industrial action.

More significantly for employers who do not currently recognise a union, the ERA 2025 requires employers to inform employees of their right to join a trade union, grants trade unions a right of access to workplaces to meet, represent, recruit or organise workers, and makes it easier for unions to obtain statutory recognition.

Impact

Whether or not employers will be faced with an increase in strikes depends more on the general industrial relations climate than on the legislation.

However, the right of access offers trade unions much greater visibility amongst workers. This, combined with the provisions requiring employers to inform workers of their right to join a trade union, and simplifying the trade union recognition process has the potential to lead to greater union presence in many workplaces and an increase in the number of employees whose terms are determined by collective bargaining.

If more workplaces become unionised and trade union membership increases, there may be a corresponding increase in the risk of claims relating to trade union rights (e.g. detriment / dismissal for trade union activities or industrial action). The proposed fines for breach of trade union access agreements are also significant.

Timing

Repeal of the Trade Union Act 2016 provisions two months after Royal Assent (i.e. from 18 February 2026).

Trade Union recognition process changes expected to take effect in April 2026

Other provisions expected to take effect in October 2026.