What Has the Employment Rights Act 2025 Changed for UK Employers and Workers?

Last reviewed: 8th June 2026

Key Points

● The Employment Rights Act 2025 received Royal Assent on 18th December 2025, replacing the long-running Employment Rights Bill and introducing the most far-reaching reforms to UK employment law in a generation, with changes phased in from April 2026 through to January 2027 and beyond.

● From 6th April 2026, statutory sick pay became a day-one right for all workers regardless of earnings, paternity leave and unpaid parental leave also became available from day one of employment, and the maximum collective redundancy protective award doubled to 180 days' gross pay per affected employee.

● The National Living Wage rose to £12.71 per hour on 1st April 2026, and the tribunal week's pay cap increased to £751 on 6 April 2026, raising the maximum unfair dismissal basic award and statutory redundancy payment to £22,530.

●. The unfair dismissal compensatory award cap rose to £123,543 on 6th April 2026 but is expected to be removed entirely for dismissals occurring from 1 January 2027, when the qualifying period for unfair dismissal will also fall from two years to six months.

●. Further reforms coming from October 2026 and January 2027 include tighter restrictions on fire-and-rehire practices, extended tribunal claim time limits, and a stronger duty on employers to take all reasonable steps to prevent sexual harassment, upgrading the existing obligation under the Worker Protection (Amendment of Equality Act 2010) Act 2023.

UK employment law has undergone its most substantial overhaul in decades. The Employment Rights Act 2025 (ERA 2025) received Royal Assent on 18 December 2025, converting years of consultation and Parliamentary debate into statute. Employers, workers, and HR teams across England, Scotland, and Wales now face a phased programme of reform that began on 6th April 2026 and will continue through to at least January 2027, with further secondary legislation extending the timetable into 2027 and 2028 for some provisions.

The Act applies to England, Wales, and Scotland. Northern Ireland operates a separate employment law framework and is not covered here. Any business with employees in Great Britain should already be reviewing contracts, policies, and payroll processes, because several changes are already in force and others arrive within months.

What the Employment Rights Act 2025 Has Already Changed

Statutory sick pay from day one

Before 6th April 2026, statutory sick pay (SSP) was available only to employees who earned at least £125 per week and who had been off sick for at least three qualifying days. The ERA 2025 removed both requirements. From 6 April 2026, any worker who meets the remaining eligibility criteria receives SSP from the first full day of sickness absence, and the lower earnings limit no longer applies.

The rate is the lower of £123.25 per week or 80 per cent of the worker's average weekly earnings. Payroll teams processing absences that began before 6 April 2026 should note that the three waiting days are treated as satisfied from the changeover date, so workers already absent on that date became entitled to SSP immediately. Enforcement falls to the new Fair Work Agency, which began operating on 7th April 2026 as the government's consolidated labour enforcement body.

Day-one rights to paternity and parental leave

From 6th April 2026, the 26-week continuous service requirement for paternity leave was removed. Employees whose child is born or placed for adoption on or after 6th April 2026 can take paternity leave from their first day of employment. The 26-week qualifying period for statutory paternity pay remains unchanged: the leave itself is now a day-one right, but pay entitlement still requires the service threshold to be met.

Unpaid parental leave also became a day-one right on the same date. Employees no longer need one year's service before accessing the 18-week unpaid parental leave entitlement. Separately, the Paternity Leave (Bereavement) Act 2024 came into force on 6 April 2026, entitling bereaved partners to up to 52 weeks of paternity leave where the mother or primary adopter dies within the child's first year.

Employers providing family leave as part of a contractual package should check whether service conditions in those policies now conflict with the statutory position. Policies tied to a 26-week or one-year qualifying period for paternity or parental leave became unlawful from 6th April 2026. For guidance on the full range of leave available to employees, our maternity and paternity leave solicitors in Solihull can advise both employers and employees on their rights.

Collective Redundancy and the Doubled Protective Award

Where an employer proposes to make 20 or more redundancies at one establishment within 90 days and fails to comply with the collective consultation obligations under the Trade Union and Labour Relations (Consolidation) Act 1992, a tribunal can award a protective award. The ERA 2025 doubled the maximum from 90 days' gross pay to 180 days' gross pay per affected employee, with effect for dismissals taking effect on or after 6th April 2026. In larger restructurings, this change materially increases the financial exposure for businesses that fail to consult properly.

Updated statutory rates and tribunal limits

The Employment Rights (Increase of Limits) Order 2026 came into force on 6th April 2026. The week's pay cap for redundancy and unfair dismissal calculations rose from £719 to £751. The maximum statutory redundancy payment and maximum unfair dismissal basic award each increased to £22,530. Statutory maternity pay, adoption pay, paternity pay, shared parental pay, and neonatal care pay all rose to £194.32 per week for the prescribed rate weeks from 6 April 2026.

The National Living Wage (for workers aged 21 and over) increased to £12.71 per hour from 1st April 2026, representing a 4.1 per cent rise. Workers aged 18 to 20 now receive at least £10.85 per hour, and those aged 16 to 17 and apprentices receive at least £8.00 per hour.

What Has Already Been in Force Since Before April 2026

Neonatal care leave

Since 6th April 2025, employees whose child requires neonatal care can take up to 12 weeks of statutory neonatal care leave, with eligible employees also entitled to statutory neonatal care pay. To qualify for leave, the child must receive an uninterrupted period of at least seven days of neonatal care beginning within 28 days of birth. Statutory neonatal care pay requires at least 26 weeks of continuous service and is paid at the same prescribed rate as other statutory family payments, which rose to £194.32 per week from 6th April 2026.

Duty to prevent sexual harassment

Since 26th October 2024, all UK employers have been under a positive legal duty to take reasonable steps to prevent sexual harassment of their employees. The Worker Protection (Amendment of Equality Act 2010) Act 2023 inserted section 40A into the Equality Act 2010, creating an obligation to act in anticipation of risk, not merely in response to complaints. A tribunal that finds a successful sexual harassment claim can uplift the compensation awarded by up to 25 per cent if the employer has failed to discharge the duty.

Suppose a Solihull business operates a busy customer-facing environment and has not yet updated its sexual harassment policy or carried out a risk assessment since October 2024. If a customer harasses an employee and the employer cannot demonstrate it took reasonable preventive steps, a tribunal could add a 25 per cent uplift to any harassment award. The Equality and Human Rights Commission can also issue an unlawful act notice for breach of the duty independently of any individual claim.

Under the ERA 2025, this duty will be strengthened from October 2026: the standard moves from "reasonable steps" to "all reasonable steps", and third-party harassment provisions will also come into force, covering harassment by customers, clients, or contractors. Employers should treat October 2026 as the target date for completing any policy or training review. Our discrimination at work solicitors in Solihull can help employers assess whether current arrangements meet the incoming standard.

What Is Still to Come

Unfair Dismissal from January 2027

The ERA 2025 will reduce the qualifying period for unfair dismissal from two years to six months, with effect from 1st January 2027. Any employee with at least six months' service on that date will gain protection immediately. Employees hired by the end of June 2026 will qualify on commencement, so employers taking on staff now are effectively recruiting people who will have unfair dismissal rights within months.

At the same time, both statutory caps on unfair dismissal compensation will be abolished from 1 January 2027. Currently the compensatory award is capped at the lower of 52 weeks' gross pay or £123,543. Once removed, tribunals will make uncapped awards reflecting actual financial loss, subject to the "just and equitable" requirement and standard deductions for contributory fault and mitigation. For high earners this change is material: a director earning £250,000 a year who is unfairly dismissed could face a claim worth several years' salary. Employers should factor this into how they approach exits, disciplinary processes, and settlement negotiations.

The ERA 2025 also removes the power to vary the qualifying period by secondary legislation. Any future change will require primary legislation.

Fire and rehire

From 1st January 2027, dismissal effected to impose a change to a "restricted contract variation" will be automatically unfair in most circumstances. Restricted variations cover changes to pay, hours, pensions, and similar core terms. The narrow exception, where a business faces severe financial difficulties and genuinely has no alternative, is difficult to rely on and should not be treated as a routine fallback. Employers who want to vary terms consensually before January 2027 should do so promptly, because changes made before commencement will not be subject to the new restrictions. Our employment law team for businesses in Solihull advises on managing contract change programmes within these constraints.

Guaranteed Hours for Zero-Hours Workers

The ERA 2025 contains provisions requiring employers to offer workers on zero-hours or low-hours contracts a guaranteed hours offer at the end of each reference period, reflecting the hours actually worked during that period. These provisions have not yet commenced. A government consultation on the detail, including the length of the reference period (the preferred option is 12 weeks), closed in August 2026 for England and Wales. Commencement is expected in 2027.

Extended tribunal time limits

From October 2026, the primary time limit for bringing most employment tribunal claims will extend from three months to six months. This is a significant change for employers managing grievances, settlements, and litigation risk, because it extends the period during which former employees can file a claim after their employment ends.

Frequently Asked Questions

Is unfair dismissal now a day-one right?

No, day-one unfair dismissal rights were not included in the final version of the Employment Rights Act 2025. The qualifying period will shorten from two years to six months, but that change does not take effect until 1 January 2027. Until then, the current two-year qualifying period continues to apply.

When does the cap on unfair dismissal compensation go?

The compensatory award cap, currently £123,543 for dismissals on or after 6th April 2026, will be abolished for dismissals taking effect on or after 1st January 2027. The basic award and statutory redundancy pay calculations are not affected by this change.

Does the SSP change affect workers already off sick on 6 April 2026?

Yes, workers who were already absent on 6th April 2026 and had not yet completed the three waiting days became entitled to SSP from 6 April 2026, provided they met the other qualifying conditions. Workers who earned below the former lower earnings limit of £125 per week also became entitled from 6 April 2026 if they were in an ongoing absence. There are transitional rules protecting workers who were already receiving the flat-rate SSP from a reduction if they earned between £125 and £154.05 per week.

What does the sexual harassment duty require employers to do right now?

Since 26 October 2024, employers must take reasonable steps to prevent sexual harassment of their employees. This means conducting a risk assessment specific to the business, having an up-to-date policy, delivering training, establishing clear reporting channels, and documenting the steps taken. From October 2026 the standard rises to "all reasonable steps" and will extend to third-party harassment, so employers should use the period before then to complete any gaps in their current arrangements.

Are zero-hours contracts now banned?

No, zero-hours contracts have not been banned. The Employment Rights Act 2025 introduces a right for qualifying workers to receive a guaranteed hours offer after each reference period, but this provision has not yet commenced and is expected to take effect in 2027, subject to further regulations. Workers on zero-hours contracts retain the same general employment protections as other workers in the meantime.

About the Author

Stephanie Howard is a Director of Pearcelegal and Head of the firm's Family and Litigation department. Admitted as a solicitor in 2015, she advises on the full range of family work, including divorce, financial remedy proceedings, child arrangements, civil partnerships and cohabitation disputes, alongside general civil litigation and contentious probate. Stephanie joined Pearcelegal in 2014, was promoted to Associate in 2021, took over the Family and Litigation team in 2023 and was appointed a Director in April 2026. She is regulated by the Solicitors Regulation Authority (SRA ID 432274).