Employment Law Update December 2025
The Employment Rights Bill has today (18 December 2025) received Royal Assent and has now become the Employment Rights Act 2025. The press release can be found here.
Since the Bill was first published in October 2024, a number of the proposed reforms have been changed or removed altogether, so we set out below a final summary of the key changes:
Key changes
Unfair dismissal – qualifying period: The 2 year qualifying period for unfair dismissal claims will be reduced to 6 months. It will apply to employees who have 6 months’ qualifying service on 1 January 2027.
Unfair dismissal – compensation cap: Unexpectedly, the compensation cap on unfair dismissal claims is being removed. Currently it is 52 weeks’ gross salary or £118,223 (whichever is lower). We believe that this change will take effect at the same time as the change to the qualifying period, i.e. on 1 January 2027. This could be the most significant change brought in by the Act. It will make settling claims and resolving senior exits trickier.
Extended Tribunal claims period: The Act will also extend the time limit for bringing tribunal claims from 3 to 6 months. This is expected to take effect from October 2026.
Fire and re-hire: It will be automatically unfair to dismiss an employee for refusing to agree to a change to certain core terms, including pay, number of working hours, pension, shift times and length, and time off rights. There is a very limited exception where an employer has a genuine need to avoid serious financial issues that may threaten the business, provided that the employer has complied with the Code of Practice on dismissal and re-engagement (which will be updated). Changes to other terms and conditions will not be automatically unfair but will remain subject to the usual unfair dismissal laws. In addition, the replacement of employees with self-employed independent contractors, workers who are not employees, agency workers or any other individuals who are not employed by the employer will also be banned, if the replacement is going to do substantially the same work. These changes will come into effect in October 2026.
Guaranteed hours: The Act contains complex new rules requiring employers to make an offer of guaranteed hours to a qualifying worker after the end of every reference period, if the hours regularly worked exceed the minimum number set out in their contract. A broader category of workers will also have a right to reasonable notice of a shift, as well as notice of any changed or cancelled shift. Key details, like the reference period and exactly who will qualify, will be set out in regulations.
Maternity/family leave returners: Since April 2024, where a redundancy situation arises during the protected period of pregnancy, maternity leave and on return to work (up to 18 months after birth), an employee has priority over suitable alternative employment. Similar provisions apply to protect employees during and after shared parental/adoption leave. According to the explanatory notes at the Bill stage, the Act will ban dismissals of women who are pregnant, on maternity leave, and during a six month return to work period, except in specific circumstances. A consultation has opened on when dismissal of pregnant women and new mothers will still be allowed and when the protections should start and end. The Government is also consulting on whether other new parents should be protected. Consultation closes on 15 January 2026.
Flexible working: Whilst the changes fall short of making flexible working the default, as had been described previously, the Act will require that any refusal of a flexible working request has to be reasonable, and from the current list of 8 specified grounds for refusal. There is also a requirement for the employer to explain in writing to the employee why their refusal is reasonable. There is no change to the penalty for breach (which is 8 weeks' pay). We are expecting these changes to take effect in 2027.
Paternity leave: The Act will remove the requirement for an employee to have 26 weeks’ service in order to take a period of paternity leave. This comes into effect in April 2026.
Parental leave: The Act will remove the requirement for an employee to have 1 year’s service in order to take a period of parental leave. This comes into effect in April 2026.
Statutory sick pay: The waiting period will be removed, so pay will start from day 1 of sick leave. The Act will also remove the requirement that an employee must earn above the lower earnings limit in order to be eligible for SSP. This comes into effect in April 2026.
Bereavement leave: The Act will introduce a new day 1 right to at least one week of bereavement leave for employees – not just for parents. It will also include employees (and their partners) who experience pregnancy loss before 24 weeks.
Harassment: Employers will have full liability for third party harassment.
Sexual harassment: As of 26 October 2024, employers must take “reasonable steps” to prevent sexual harassment of employees and workers in the course of their employment. The Act will strengthen this and require employers to take “all” reasonable steps to prevent workplace harassment.
Non-disclosure agreements: Any agreement preventing a worker from making allegations or disclosures about harassment or discrimination (including a failure to make reasonable adjustments) will be void. The implementation date of this is unknown.
Collective redundancy consultation: The threshold for collective consultation will be changed (further details are awaited) and the cap on protective awards in collective redundancy situations will be increased from 90 days to 180 days to encourage employer compliance. The new penalty applies from April 2026.
Equality reporting: The Act will require large employers (+250 employees) to publish menopause and gender pay gap action plans, as well as ethnicity and disability pay gap figures. Details of the requirements will be set out in regulations. This is expected to be compulsory from 2027.
Trade Unions: There are a raft of changes relating to the laws on Trade Unions. These include a significant new right for trade unions to access workplaces for recruitment and organising purposes. There is an open government consultation on how this right should work in practice. In addition, there is a new duty to inform workers of their right to join a trade union. There will also be a reduced threshold for unions to secure statutory trade union recognition, removing the current threshold of 40% of all workers in the bargaining unit voting for recognition.
Fair Work Agency: A new single enforcement body for workers’ rights will be established, called the Fair Work Agency (FWA). This body will be able to bring Employment Tribunal claims on behalf of workers, even where the worker chooses not to, and will have the power to offer legal assistance for employment cases, with the Fair Work Agency's costs potentially recoverable from employers if the claim succeeds. The FWA will be created in April 2026.
Top 5 actions for employers
Consider whether to shorten contractual probationary periods to ensure that final decisions are implemented before the 6 month mark.
Review and update performance review processes to ensure that probationary periods are being effectively utilised.
Consider whether any changes to existing employees’ contracts are needed and ensure that these processes take place under the current legal regime, and before the new fire and re-hire laws take effect from October 2026. Ensure template contracts used for new recruits have as much built in flexibility as possible.
Update policies to reflect the changes to rights relating to family leave, bereavement (including pregnancy loss) leave, sick leave and flexible working.
Ensure you have taken all reasonable steps to prevent sexual harassment in the workplace in compliance with the October 2024 duty, and continue to review these measures.
We will keep you updated on any further developments via this news page. Please get in touch if you have any questions in the meantime.