Employment Rights Act 2025: What Do Employers Need to Do Now?

There has been a huge amount of noise about the Employment Rights Act 2025 (ERA) and the significant changes coming into force. At times it has felt like a full-time job keeping track of the various changes, timescale for implementation and the recently launched consultations on the different areas impacted and it’s likely the attention required will continue for some time. But what does this actually mean for employers and what practical steps can be taken now to prepare?

In truth, much of the ERA won’t require employers to practically do anything differently, but it will significantly tip the balance between employers and employees, strengthening employees’ position and the employment rights that support them. In the main, this isn’t about updating policies and procedures (although there may be some of that) but rather a fundamental shift in the employment law framework, which may require employers to upskill managers to ensure they are managing staff effectively, to protect against the increased chance of challenge.

Unfair Dismissal

One way we will see this shift play out is through the reduction of the qualifying period for unfair dismissal from 2 years to 6 months and removal of the cap on the unfair dismissal compensatory award. These changes come into force on 1 January 2027 and mean that many more employees will become eligible to bring claims for unfair dismissal and also that unfair dismissal claims will provide meaningful recourse for higher earners, who would otherwise have their claim for compensation capped. It seems inevitable that this will result in more litigation.

To try and pre-empt this, it will be important to ensure that recruitment practices are robust and that new joiners are actively monitored to ensure they are a good fit for an organisation, since there will obviously be less time to assess them before their unfair dismissal protection will kick in. It’s likely that the burden of effective probation reviews will fall to managers, who will need to ensure that decisions about future employment are made in advance of an employee accruing 6 months’ service. One practical step to take now is to ensure that managers are appropriately equipped and trained to take on this burden.

Tribunal Time Limits

From October 2026, the time limit for submitting an employment tribunal claim will increase from 3 to 6 months. Whilst, optimistically, this might provide more time for resolving disputes prior to litigation, it’s also likely to mean that employers will face uncertainty for longer, waiting for a potential claim to arrive, and will then have a more difficult job defending claims which relate to more historical circumstances. Clear record-keeping will be key to assist with defending such claims and it may be worth ensuring managers understand the role they have to play in this regard.

First Changes in Force

The first major tranche of reforms comes in on 18 February 2026, and primarily impact trade unions and industrial action. In keeping with the general shift towards employees, it will become easier for unions to organise industrial action, with reduced notice to be given to employers of any upcoming strike and stronger protection against dismissal for involvement in industrial action.  Employers concerned about potential industrial unrest may want to consider their strategy in place to ensure that any dispute can be resolved constructively.

Current Consultations

There are other changes coming – relating to the regulatory framework for agency work, flexible working, fire and rehire practices and use of zero-hours’ contracts – but these are all still subject to consultation. Employers may well want to contribute their views to those consultations (which can be found here: https://www.gov.uk/government/collections/make-work-pay), but there are no immediate changes required to working practices. We will keep you updated as these areas develop.

Preparation Needed Now

So, are there other practical steps that employers should be taking now to prepare? There are changes coming in relation to parental and paternity leave, making them ‘day 1’ rights from April this year (or from 18 February 2026 where the mother or adopter has died), so it may be worth reviewing relevant family leave policies, in case they need amending. Similarly, it is expected that the 4 day ‘waiting period’ before payment of statutory sick pay will be removed from April (subject to further substantive regulations), along with the lower earnings limit, so any policy on sick pay may need to be updated.

Finally, the Fair Work Agency (FWA) will be established on 7 April 2026, which will take over the enforcement function of HMRC amongst others, and in due course is expected to take over enforcement relating to holiday pay and SSP.  The government is planning to require employers to hold certain other records relating to working time (specifically to demonstrate compliance with provision and payment of annual leave) and whilst it’s not yet clear when this requirement will come into force, this may be something that is delegated to the FWA to enforce in due course. At this stage, employers simply need to be aware that the requirement for increased record-keeping is on its way.

We will provide further updates as other changes are finalised and implemented.