By Tim Gooder & Emma-Jane Dalley
|Published 08 October 2026
Note: This article was first published in the October 2026 edition of Charity Finance.
Described by the government as "the biggest upgrade in employment rights for a generation", the Employment Rights Act 2025 received Royal Assent in December 2025. Implementation will be phased across 2026 and 2027.
Several provisions of the Employment Rights Act 2025 came into force on 6 April 2026, with implications for charities of all sizes.
Statutory Sick Pay (SSP) is now payable from the first day of sickness absence and has been extended to employees earning below the lower earnings limit. For charities relying on casual, sessional, or part-time workers, that could mean increased payroll costs and administration. Organisations offering contractual sick pay from day one may feel less of a financial impact, but should still ensure payroll systems and sickness policies reflect the new rules. Charities delivering services through fixed-price contracts or restricted grants may be particularly affected, as they will need to absorb both SSP and absence cover costs. Finance and payroll teams should also check their systems can record single-day absences and calculate SSP correctly for lower-paid employees.
Paternity leave and unpaid parental leave are now available from the start of employment. While unpaid parental leave involves no direct salary cost, and statutory paternity pay still requires six months' service, charities may incur costs for arranging cover and administering leave requests. Policies, procedures, and manager guidance should be updated accordingly.
The Act also requires employers to keep adequate records demonstrating compliance with holiday entitlement and pay obligations. While this may seem like an administrative change, charities should review whether leave records are stored consistently and are easily accessible when needed, especially where HR and payroll information sits across different systems.
Another important change is the extension of whistleblowing protection to disclosures about sexual harassment. For charities, this means reviewing whistleblowing policies, complaints procedures and reporting arrangements. Managers and trustees should be confident in recognising when concerns may be legally protected and handling them appropriately. Investing in training now could help avoid greater costs later, both in terms of potential tribunal claims and reputational damage.
Further reforms will take effect in October 2026, giving charities limited time to review their policies and processes.
From 1 October 2026, the time limit for bringing most employment tribunal claims will double from three to six months. This is widely expected to result in more claims being brought. Charities may also need to retain records for longer and identify and preserve relevant documents early as delays can make claims more difficult to defend.
From 30 October 2026, employers will be required to take "all reasonable steps" to prevent sexual harassment, replacing the current requirement to take "reasonable steps". They will also have to prevent third-party harassment of employees. Failure to meet these obligations could result in tribunals increasing compensation by up to 25% in sexual harassment cases.
Charities may find the strengthened duty difficult to satisfy, particularly where employees regularly interact with third parties such as service users or suppliers. Organisations should review whether existing prevention measures adequately address their workplace risks, train managers to handle harassment complaints and ensure staff know how to raise concerns.
Also from 30 October 2026, employers will need to provide workers with a written statement explaining their right to join a trade union. Trade unions will also gain new physical and digital workplace access rights. Employers and unions will be expected to agree access arrangements, with the Central Arbitration Committee able to determine access where agreement cannot be reached.
While charities with fewer than 22 employees will be exempt from the new access requirements, larger organisations should consider how they would respond to access requests. The changes may also increase interest in union membership and lead to more union recognition requests.
From 1 January 2027, employees will gain protection from ordinary unfair dismissal after six months' service rather than the current two years. At the same time, the statutory cap on compensatory awards will be removed.
For charities, this means probationary periods and performance management processes will come under greater scrutiny. Managers will need to address performance concerns early and decide promptly whether employees should be confirmed in post. Once an employee reaches six months' service, employers will need to be able to demonstrate a fair reason for dismissal and that they followed a fair process.
Dismissal and re-engagement - often referred to as "fire and rehire" - is also expected to become significantly more restricted from January 2027. Under the new rules, these dismissals will be automatically unfair unless a very limited exception applies. This will make it harder for charities to impose changes to terms and conditions, including pay, pensions, working hours, and certain shift arrangements. This may pose particular challenges for charities whose staffing arrangements are dictated by short-term funding arrangements they cannot control. Organisations considering harmonisation or cost-saving programmes should start discussions early and focus on securing agreement wherever possible.
A number of significant reforms are expected to take effect during 2027, although implementation dates have yet to be confirmed.
One of the most far-reaching changes relates to zero and low hours contracts. Employers will be required to offer guaranteed hours that reflect a worker's actual working pattern, provide reasonable notice of shifts, and compensate workers for short notice shift changes and cancellations.
These changes will not apply to volunteers, but the line between workers and volunteers may sometimes be blurred so charities will need to consider carefully who is in scope. For charities relying on bank staff, relief workers or others on irregular hours, the impact could be considerable. Now is a good time to review how these arrangements are used, assess the potential cost implications and consider whether existing staffing models will remain viable.
Another significant proposal is increased employee protection during and after maternity leave. Employers will generally be prohibited from dismissing employees who are pregnant, on maternity leave, or within six months of returning to work, except in limited circumstances. While the details have yet to be finalised, charities should keep a close eye on developments, particularly if they anticipate redundancies or performance issues involving employees who may fall within the protected period.
The Fair Work Agency (FWA) was established in April 2026, with its enforcement powers being introduced in stages. Once fully operational, it will oversee compliance with the national minimum wage, SSP, holiday pay, and modern slavery requirements. It will also have the power to impose financial penalties and bring tribunal claims on workers' behalf.
For charities, this means employment compliance is likely to come under greater scrutiny. Minimum wage compliance, travel time, sleep-in arrangements, holiday pay, and SSP may be of particular interest to the FWA, especially in sectors such as social care. Reviewing these arrangements now could help identify any historic issues and reduce the risk of enforcement action later on.
While some reforms are already in force, many of the most significant changes are still to come. Charities should use the time available to review their policies and internal procedures rather than waiting until implementation dates arrive.
In the short term, priorities include updating sickness absence, family leave, holiday record-keeping, and whistleblowing procedures, and reviewing probation periods for new joiners. Charities should also revisit their approach to preventing sexual harassment, and refresh managers' training on recognising and responding to protected disclosures.
Looking further ahead, organisations should assess their reliance on irregular-hours workers and short-notice cover arrangements in anticipation of the new rules on zero and low hours contracts. Managers should also be prepared for the shorter qualifying period for unfair dismissal claims.
Finally, with the FWA's enforcement powers continuing to expand, now is a good time to review minimum wage, holiday pay and SSP compliance. Identifying and addressing potential issues early is likely to be easier and less costly than responding to enforcement action or tribunal proceedings later.
