Employers must prepare now for the Employment Rights Act 2025

Professional services firms will need to balance flexibility and compliance as the Employment Rights Act 2025 reshapes expectations around hybrid working, employee voice and contractual certainty.

The Employment Rights Bill passed through Parliament in December 2025 following months of intense debate and amendment, marking the most significant overhaul of employment rights in over a decade.

While secondary legislation will follow in 2026 to set out the detailed rules and procedures needed to make the Act fully operational, the direction of travel is now clear.

With Royal Assent granted, employers should shift their focus to early preparation, robust processes and improved manager capability to navigate the changes ahead.

Statutory Sick Pay

From April 2026, eligibility for Statutory Sick Pay (SSP) will expand significantly. Waiting days will be removed, SSP will be payable from day one of sickness rather than after day three, and the lower earnings threshold will be abolished.

Kathryn Gilbert, Head of HR Services

Kathryn says: “Employment status will therefore become even more important. Where individuals work on a genuinely casual basis, SSP may not apply. However, individuals who work regular or guaranteed hours are likely to qualify, regardless of labels such as ‘zero-hours’ or ‘casual’.

“Employers should review contracts and working arrangements to ensure they reflect the reality of the working relationship, as labels alone will not determine entitlement.”

Unfair dismissal

The qualifying period for bringing an ordinary unfair dismissal claim will reduce from two years to six months, alongside the removal of the statutory compensation cap (subject to impact assessment). Automatic unfair dismissal claims, including those linked to whistleblowing, discrimination or pregnancy, will remain day-one rights.

Decisions taken during the first six months of employment will therefore be far more open to challenge.

Lorna Thorley, HR Advisor

Lorna says: “Poorly documented probationary dismissals will carry significantly higher risk, meaning employers will need to strengthen early-performance processes, train managers on fair decision-making and ensure dismissal decisions are evidence-based and procedurally sound.”

Family leave

Statutory Paternity Leave and Unpaid Parental Leave will become day-one rights, with the continuity of service requirement removed. Statutory Paternity Pay will, however, continue to require 26 weeks’ service.

Lorna says: “Unpaid parental leave allows parents to take up to 18 weeks’ leave per child, capped at four weeks per year, and may be used, for example, as an alternative to annual leave during school holidays.”

Sexual harassment

Since October 2024, employers have been required to take reasonable steps to prevent sexual harassment. From April 2026, sexual harassment complaints will also attract whistleblowing protection, increasing the legal consequences of poor handling.

Kathryn says: “Employers that have not yet considered what steps they need to take to prevent sexual harassment, or that lack robust whistleblowing, disciplinary and grievance policies, risk significant legal exposure.”

Fair Work Agency

The Fair Work Agency will be established to support compliance with SSP and holiday pay requirements. Where employees are unwilling or unable to bring claims themselves, the Agency will have the power to pursue up to six years of underpayments of SSP and holiday pay on their behalf.

Kathryn says: “We strongly advise employers to prepare their businesses now and ensure compliance, rather than risk costly claims and financial penalties.”

Trade union activity

Kathryn says: “Changes taking effect from February 2026 will reduce notice periods for industrial action, lower voting thresholds, extend mandates to 12 months and make dismissal for lawful industrial action automatically unfair.

“Lower thresholds and longer mandates may encourage increased union activity in sectors that have traditionally seen limited engagement.

“Employers should consider whether consultation and communication channels are effective and ensure managers are appropriately trained to handle collective concerns before they escalate.”