The Employment Rights Bill has finally completed its difficult passage through Parliament, ping ponging between the House Commons and the House of Lords over several months. Royal Assent was eventually received on 18 December 2025, with the Bill now becoming the Employment Rights Act 2025 (the Act).

The Act will introduce wide-ranging reforms which are set to significantly reshape the employment law landscape. This article sets out the key highlights, as well as what you and your business should be aware of, over the coming year. There is a lot to consider and still more regulations to come.   We will keep you updated with significant developments.

As to the timing of these changes, the government published a delivery roadmap (the Roadmap)  on 1 July 2025, bringing clarity to previously uncertain implementation dates (see https://www.gov.uk/government/publications/implementing-the-employment-rights-bill). The dates referred to in this article are based on that roadmap, adjusted to reflect any milestones that have already been missed.

Right Not To Be Unfairly Dismissed:

Employees are currently required to complete two years’ service before gaining the right not to be unfairly dismissed.  Under the Act, the qualifying period will only be six months before an employee can make a claim for unfair dismissal.

At present, compensation for unfair dismissal is capped at the lower of 52 weeks’ gross pay or the statutory maximum currently £118,223. However, under the Act, the statutory cap will be abolished. The basic award and statutory redundancy payment calculation remains unchanged and will continue to be calculated based on age, length of service and gross weekly pay, currently capped at £719.  

The government has confirmed that the change to unfair dismissal qualification period will take effect from 1 January 2027, allowing any employee with six months’ service on or after that date to bring an unfair dismissal claim. It is likely that the change to the compensation awards will also be around this time.

Changes to the Collective Redundancy Consultation Threshold

The point at which an employer must carry out collective redundancy consultation is being lowered. Currently, employers are only required to carry out such a consultation when 20 or more redundancies at a single site are proposed, within 90 days.

Under the new rules, the threshold has been lowered for when a collective redundancy consultation must be used. In practice, this is likely to mean redundancies will be counted across the whole organisation, rather than being assessed separately at each site or “establishment”.

This change will make it much easier to trigger collective consultation, particularly for multi-site or multi-location employers. Employers will need to keep careful records of redundancies across the business to avoid inadvertently failing to comply with their obligations. Redundancy exercises that would previously have fallen below the threshold may now require:

• Consultation with employee representatives or trade unions
• A minimum consultation period
• Submission online of the HR1 form to the government.

The government has indicated that they will be consulting on collective redundancy measures in late 2025/early 2026, although this is yet to occur. The additional threshold test for collective redundancies will be introduced in 2027 and we will keep you updated as this area develops.

Protective Award

Previously, if an employer did not comply with collective consultation requirements for redundancies, it faced a protective award of up to 90 days’ pay per employee. The implementation of the Act will double this award up to 180 days’ pay.

According to the Roadmap the increase of the protective award will take effect in April 2026.

Restrictions on “Fire and Rehire”:

An employer’s ability to use “fire and rehire” practices to alter an employee’s contractual terms will be significantly restricted.

The Act will make it automatically unfair to dismiss and rehire employees in order to alter certain core contractual terms, including:

• Pay
• Required working hours
• Pension
• Shift times and length
• Time-off rights

The Act also covers dismissals aimed at introducing new flexibility clauses covering these protected terms.

There is a narrow exception to the overarching ban if an employer can prove their actions were in response to financial difficulties which put the ongoing operation of the business at risk.

According to the Roadmap, these changes will take effect in October 2026.

Changes to Zero Hour Contracts:

While the Act does not ban zero-hour contracts outright, employers will be required to offer “guaranteed-hours contracts” after a specified reference period, based on the actual hours worked during that time.

Although the specific reference period has not been decided, there is an indication of 12 weeks.

Employers will also be obliged to give reasonable notice if shifts are cancelled or changed, and employers may face financial penalties for cancelling shifts at short notice. If a worker is not offered hours on these terms, they will be entitled to bring an Employment Tribunal claim, with the maximum award to be set out in future regulations.

Consultation is planned for early 2026, with the measures (which will also extend to agency workers) taking effect in 2027.

Changes to Family Rights:

Paternity leave and parental leave will become a day one right. The current service requirements (26 weeks for paternity leave and one year for unpaid parental leave) will no longer apply, meaning employees can take such leave from the very start of their employment.

Interplay of Paternity Leave with Shared Parental Leave:

Currently, taking shared parental leave before using paternity leave results in the loss of paternity entitlements. Under the Act, employees will be permitted to take paternity leave and pay even after shared parental leave.

Employers should also be aware that the dismissal of employees during pregnancy or maternity, adoption or shared parental leave, or within six months of their return to work will be unlawful, except in certain circumstances which will be set out in future regulations.

The Roadmap indicates that these changes will take effect in April 2026. 

Statutory Sick Pay Reforms

Previously, Statutory Sick Pay (SSP) was only payable from day four of an employee’s sickness and employees had to be earning above the weekly lower earnings limit (currently £123 per week) to qualify.

However, under the act, SSP will be payable from day one of sickness and payable for the first three qualifying days of sickness. Additionally, the lower earnings limit will be removed, meaning that all eligible employees, regardless of earnings, will be entitled to SSP. Those earning under the lower earnings limit will be entitled to SSP at a rate of 80% of weekly earnings.

The Roadmap indicates that this will take effect in April 2026.  

Next Steps

With the upcoming phased implementation of the Employment Rights Act 2025, employers will need to ensure they are well prepared to ensure compliance. Planning ahead will be key to navigating this major shift in the UK employment landscape successfully and the employment team at Taylor Walton will be on hand to assist employers with the changes.

If you wish to discuss any of the issues highlighted in this article, please contact a member of our team here.

Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.