legal update / 16th Dec 2025

Employment Rights Act 2025

SECTION GUIDE

The Employment Rights Bill (ERB) has now completed its passage through Parliament and gained Royal Assent to now become the Employment Rights Act 2025. Attention has therefore moved decisively away from whether the Bill will become law and towards how and when its provisions will be implemented.

This legislation represents the most significant reform of UK employment law in a generation. Its impact will be felt across dismissal risk, absence management, workforce flexibility, industrial relations and enforcement. While implementation will be phased across 2026 and 2027, the legal framework is now set.

From an HR advisory perspective, the message to employers is clear, this is no longer about monitoring legislative progress — it is about preparing for delivery.

What the Employment Rights Act 2025 changes in practice

Unfair Dismissal: A shortened qualifying period

What has changed

The Employment Rights Bill reduces the qualifying period for ordinary unfair dismissal claims from two years’ continuous service to six months. Proposals for day-one unfair dismissal rights were not adopted, but the reduction still represents a fundamental shift in employer risk.

Automatically unfair dismissal protections, including those relating to whistleblowing, pregnancy, health and safety, and asserting statutory rights, continue to apply from day one, unchanged.

There is also the removal of the current cap for unfair dismissal claims.

What this means for employers

The first six months of employment now represent a high-risk period. Employers can no longer rely on informal probation management or the historic two-year buffer.

In practical terms, employers must:
- Operate structured probation processes with clear objectives
- Address underperformance or conduct issues early and with evidence
- Ensure managers are trained and confident in managing early-stage employment decisions
Businesses that do not formalise early performance management will face increased exposure to tribunal claims.
Statutory Sick Pay: Entitlement from day one

What has changed

The ERB reforms Statutory Sick Pay by:
- Making SSP payable from the first day of sickness absence
- Removing the Lower Earnings Limit, extending eligibility to lower-paid and casual workers
This change is confirmed in law, with the commencement to follow through regulations.

What this means for employers

SSP will apply more widely and more quickly than before. For many employers — particularly SMEs — this will:
- Increase direct employment costs
- Bring short-term absence into sharper focus
- Require greater consistency in absence management
Employers should already be reviewing:
- Absence policies and trigger points
- Return-to-work processes
- Payroll configuration and reporting
Family Leave: Day-One eligibility

What has changed

Eligibility for paternity leave and unpaid parental leave now applies from day one of employment. Previous service thresholds no longer apply.

What this means for employers

This change alters workforce planning, particularly in small teams. Employers must assume that statutory leave requests may arise immediately after hire and ensure policies, systems and resourcing plans reflect this reality.
Zero-Hours Contracts and Guaranteed Hours

What has changed

The Employment Rights Bill introduces a duty to offer guaranteed-hours contracts where a worker’s hours demonstrate regularity over a defined reference period. While zero-hours contracts remain lawful, their long-term use is now constrained.

Detailed requirements — including reference periods and eligibility thresholds — will be set out in secondary legislation.

What this means for employers

Employers relying on flexible or casual labour models must now:
- Monitor actual working patterns closely
- Identify where regularity exists in practice
- Be prepared to justify continued use of variable-hours contracts
This change places greater importance on workforce data, scheduling discipline and contract clarity.
Fire and Rehire: Substantially restricted

What has changed

Dismissal and re-engagement (“fire and rehire”) is now legislated as automatically unfair in most circumstances, particularly where contractual changes could reasonably have been achieved through consultation. Commencement is expected from October 2026.

What this means for employers

Fire and rehire can no longer be treated as a fallback option. Employers must demonstrate:
- Genuine business necessity
- Meaningful consultation
- Exhaustion of reasonable alternatives
Early HR involvement in restructures and contractual change projects is now essential.
Trade Unions and Industrial Relations

What has changed

The ERB introduces a package of reforms strengthening collective labour rights and modernising industrial action processes. Some elements are subject to phased commencement and further regulation.

What this means for employers

Even in non-unionised environments, employers should expect:
- Greater employee confidence around collective issues
- Increased scrutiny of consultation and communication
- Heightened reputational and operational risk during disputes
Strong employee relations and well-trained managers will be critical.
Fair Work Agency: A new enforcement landscape

What has changed

The Bill establishes a Fair Work Agency, consolidating enforcement of key employment rights such as SSP, holiday pay and worker status.

What this means for employers

Enforcement will become more proactive and less dependent on individual complaints. Employers should assume that compliance may be assessed through inspection and information-gathering powers.

Accurate records, up-to-date documentation and consistent practice will be increasingly important.

Implementation timeline

While the Employment Rights Act 2025 is now law, implementation will be phased:

Early 2026 – Statutory Sick Pay reform and day-one family leave
April 2026 onwards – further commencement of employment rights and enforcement provisions
October 2026 into 2027 – dismissal, contractual flexibility and industrial relations reforms

This phased approach provides time to prepare — but only for employers who act now.

What Employers should be doing now

From an HR advisory standpoint, preparation for the Employment Rights Bill should already be well underway. The organisations that manage this transition best will be those that focus less on reactive compliance and more on strengthening the fundamentals of how people are managed day to day.

Reviewing contracts, policies and handbooks

Employers should begin with a full review of employment contracts, policies and handbooks to ensure they align with the new legal framework. Documents drafted around historic qualifying periods, SSP eligibility thresholds or flexible working assumptions may no longer be fit for purpose.

In particular, employers should:
- Check probation clauses, termination wording and variation provisions
- Review absence, sick pay and family leave policies
- Ensure zero-hours and flexible contracts accurately reflect working practices
Out-of-date documentation not only increases legal risk but also weakens an employer’s position if challenged by regulators or tribunals.
Strengthening probation and early performance management

With unfair dismissal rights now applying after six months, the probation period has become a critical risk window. Informal or inconsistent approaches to early performance management will no longer be sufficient.

Employers should:
- Introduce structured probation reviews with clear objectives
- Set expectations early and document progress and concerns
- Act promptly where performance or conduct issues arise
A well-run probation process is now one of the most effective ways to manage dismissal risk under the new regime.
Preparing payroll and absence systems for SSP reform

Statutory Sick Pay reform will require more than a policy update. Payroll systems, reporting processes and manager capability must all be aligned to support day-one SSP entitlement.

Employers should:
- Confirm payroll systems can administer SSP from day one
- Review absence reporting and return-to-work processes
- Train managers to handle short-term and recurring absence consistently
This is particularly important for employers with large numbers of part-time, lower-paid or frontline staff, where SSP exposure will increase.
Analysing Zero-Hours and casual working patterns

Where organisations rely on zero-hours or casual arrangements, a proactive review is essential. The new duty to offer guaranteed hours will depend on actual working patterns, not contractual labels.

Employers should:
- Analyse hours worked over recent periods to identify regularity
- Assess where guaranteed-hours offers may be required
- Consider workforce planning and cost implications in advance
This exercise is as much about operational readiness as legal compliance.
Training managers on early-stage risk and consultation

Many of the risks introduced by the ERB will crystallise through day-to-day management decisions rather than formal HR processes. Line managers therefore play a central role in managing exposure.

Employers should ensure managers understand:
- The importance of early, evidence-based performance management
- How to handle absence, probation and conduct conversations properly
- Consultation expectations, particularly where contractual change is proposed
Investment in manager capability will significantly reduce inconsistency, conflict and claims.
Creating a clear compliance evidence framework

With the introduction of the Fair Work Agency and a more proactive enforcement model, employers must be able to demonstrate compliance, not simply assert it.

This means having:
- Up-to-date policies and contracts
- Clear records of decisions, consultations and reviews
- Consistent application of procedures across the organisation
A simple, well-organised compliance evidence framework will be invaluable if enforcement activity or inspection arises.

Your Questions Answered

Everything you need to know about...

Is the Employment Rights Bill now law?
Yes, the Employment Rights Bill became the Employment Rights Act 2025 on the 18th December 2025.
When do the changes actually take effect?
There will be a phased implementation of the key elements:
- Early 2026 – Statutory Sick Pay reform and day-one family leave rights
- April 2026 onwards – further employment rights and enforcement provisions
- October 2026 into 2027 – dismissal, contractual flexibility and industrial relations reforms
Employers should prepare in advance of each phase rather than waiting for commencement dates.
Do unfair dismissal rights now apply from day one?
No. Day-one unfair dismissal rights were not introduced. However, the qualifying period has reduced to six months, which significantly increases early-tenure risk compared to the previous two-year threshold.
Will this apply to small businesses and SMEs?
Yes, the Employment Rights Bill applies regardless of business size. In practice, SMEs are often more exposed because they rely more heavily on informal management practices and have less internal HR capacity.

Will tribunal claims increase as a result of the ERB?
The risk of claims is likely to increase for employers who do not adapt their processes. Shorter qualifying periods, wider SSP eligibility and stronger enforcement mechanisms mean poorly documented or inconsistent decisions are more likely to be challenged.

Well-prepared employers can mitigate much of this risk.
Are zero-hours contracts now banned?
No. Zero-hours contracts remain lawful. However, employers now have a duty to offer guaranteed hours where working patterns demonstrate regularity. The emphasis is on how contracts operate in practice, not just how they are written.
Is “fire and rehire” completely banned?
Not entirely, but it is now heavily restricted. Dismissal and re-engagement will be automatically unfair in most circumstances, particularly where contractual changes could reasonably have been achieved through consultation. Employers should treat this as a last resort only.
What role does the new Fair Work Agency play?
The Fair Work Agency introduces a more proactive enforcement model, consolidating oversight of SSP, holiday pay and worker rights. Employers should expect greater scrutiny and should be able to evidence compliance without relying on the absence of complaints.

Where to find out more A collection of hand-picked useful resources for the Employment Rights Bill from impact HR and beyond

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Employment Rights Act 2025

What the Employment Rights Act 2025 changes in practice