Employment Rights Act 2025: What you need to know as an employer

The Employment Rights Act 2025 marks a major shift in the UK employment law landscape.

Liam Kenealy, head of employment law at Wake Smith Solicitors, looks at the Act as a whole and what employers need to start thinking about to make sure they are fully compliant with the new demands of the Act. 

Over the coming weeks, Liam will review the key aspects of the Employment Rights Act 2025 so employers can gain a better understanding of not only what is changing, but what they need to do in relation to each area.

This article covers:

• Employment Rights Act 2025: A phased introduction
• Industrial relations under the Employment Rights Act 2025
• Unfair dismissal: One of the biggest potential risks for employers
• Contractual changes relating to dismissal and rehiring
• Day-one rights and workplace policies

Why employers should act now

The Act introduces wide-ranging reforms that will reshape how employers manage dismissals, industrial relations, contractual changes and their workplace policies. While many provisions will be phased in during 2026 and beyond, the overall direction of travel is clear - the Act will bring in greater employee protection and increased employer accountability. 

Employers need to be considering their policies and processes regarding recruitment, performance management, restructuring and employee relations. All will soon carry higher legal and financial risk so making sure employers understand what the Act means and what action they need to take is essential.

Employment Rights Act 2025: A phased introduction

One of the defining features of the Employment Rights Act 2025 is its phased implementation.

Much of the detail will be delivered through secondary legislation following extensive consultation.  While this gives employers time to adapt, it also creates uncertainty.

From a practical perspective, employers should assume:

• Existing policies may not remain compliant
• Current risk tolerances may no longer be appropriate
• Future claims may be assessed under a more employee-friendly framework

As such employers need to implement some immediate actions starting with assigning responsibility within their HR teams for tracking developments related to the Employment Rights Act 2025 and making sure your leadership team understands the potential upcoming risks before they materialise.

Industrial relations under the Employment Rights Act 2025

The Act makes immediate changes to the balance of power in industrial relations.  The primary developments include:

• Repeal of the Strikes (Minimum Service Levels) Act 2023
• Relaxation of restrictions introduced under the Trade Union Act 2016
• Expanded automatic unfair dismissal protection for employees involved in lawful industrial action, with no time limit 

For employers, particularly those involved in unionised or heavily regulated sectors, these reforms increase exposure during disputes and limit options previously available to manage disruption.

Employers should be planning to:

• Review any industrial relations strategies and contingency plans
• Train managers on lawful conduct during industrial action
• Reassess dismissal and disciplinary decisions to ensure union activity does not result in disciplinary action

Unfair dismissal: One of the biggest potential risks for employers

One of the most significant elements of the Act is the reform of unfair dismissal law.  Under the new framework:

1. The qualifying period for unfair dismissal claims will reduce from two years to six months
2. The statutory cap on unfair dismissal compensation will be removed 

This combination could significantly increase employer’s risk; more employees will be able to bring claims earlier and, compensation awards could be substantially higher.

Employers should now be considering:

• How to strengthen probation, performance management and dismissal processes
• Providing targeted training for managers involved in decisions to dismiss
• How to ensure decisions are evidence-based and procedurally fair 

Contractual changes relating to dismissal and rehiring

The Act also signals tougher regulation of so-called ‘fire and rehire’ practices. While the full details are still subject to consultation, employers should expect stricter requirements around justification, consultation and employee protection.

Employers should already be holding discussions internally around:

• How contractual changes are currently implemented
• Alternatives to dismissal-based restructuring
• What legal advice to take before changing terms and conditions

Day-one rights and workplace policies

Beyond dismissal and industrial relations, the Employment Rights Act 2025 points toward broader reform in workplace rights, including:

• Sick pay from day one
• Expanded day-one parental rights
• Enhanced gender pay gap reporting
• Greater protection for workers on zero/low hour and agency contracts
• Introduction of menopause action plans

These changes will require updates to policies, data collection and employee communications so we would recommend employers begin to discuss:

• Auditing existing HR policies against expected reforms
• How to improve the way workforce data is collected, and assign reporting capabilities
• How to fully engage employees early to support cultural and operational change

Why employers should act now

The Employment Rights Act 2025 raises the bar for how employers justify, document and implement employment decisions. Those who delay preparation risk higher litigation costs, operational disruption and reputational damage.

If employers act now, they will be much better positioned to reduce any possible legal exposure, make more consistent decisions moving forward and strengthen employee trust and retention.

We can make it much easier for employers to recognise these benefits.  Our specialist employment law team are on hand to help. We can:

• Review dismissal and probation processes urgently
• Update and deliver manager training and documentation
• Review your industrial relations strategies
• Manage ongoing consultations
• Assure you are fully compliant with the new regulations

The different elements of the Employment Rights Act 2025 will be examined in greater detail over the coming weeks.

Your next move?

However, employers wanting to discuss the implications of the new Employment Rights Act 2025 to make sure they are fully compliant moving forward, should contact us today. 

Call Wake Smith Solicitors on 0114 266 6660.

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Published 09/02/2026