Employment Rights Act 2025: Imminent employment law changes

The Employment Rights Bill has finally cleared the House of Lords and gained Royal Assent on 18^th December 2025. It is now the Employment Rights Act 2025 (ERA 2025) – a landmark reform that will reshape UK employment law.

While many of the changes will not take effect immediately, employers can now be clear on the direction of travel. It’s time to prepare.

Two late amendments made during the Bill’s final passage are particularly significant.

1.     Unfair dismissal right after 6 months, instead of a Day One right

First, the qualifying period for ordinary unfair dismissal will reduce from two years to six months, rather than being removed entirely. This change is expected to take effect from January 2027.

2.     Compensation cap for unfair dismissal likely to be abolished

Second, and potentially more impactful, the compensation cap for unfair dismissal — currently the lower of one year’s salary or £118,223 — is expected to be abolished, subject to the Government completing and publishing an Impact Assessment. If confirmed, this will substantially increase litigation risk and exposure for employers.

A phased introduction

ERA 2025 will be implemented gradually under a government roadmap.

Taking immediate effect

The repeal of the Strikes (Minimum Service Levels) Act 2023.

In the next two months

Industrial relations reforms such as, simplified industrial action ballots and notices, stronger protection against dismissal during strikes, and the repeal of much of the Trade Union Act 2016.

From April 2026

• Day-one rights to paternity leave and unpaid parental leave
• Reformed Statutory Sick Pay (no waiting days or lower earnings limit)
• Expanded whistleblowing protection, including sexual harassment complaints
• Higher penalties for collective redundancy failures

From October 2026

• Tighter controls on fire-and-rehire practices
• Stronger rules on tips
• Expanded trade union rights
• Plus, a new duty to take “all reasonable steps” to prevent sexual harassment.

2027

• The implementation of unfair dismissal changes
• Reforms covering flexible working, bereavement leave, protections for pregnant workers, restrictions on zero-hours arrangements, and regulation of umbrella companies.

What should employers be doing now?

Prepare. ERA 2025 is not a single moment of change but a rolling programme of reform. Employers that start planning early – rather than waiting for implementation dates – will be best placed to manage risk, cost and disruption as the new framework takes shape.

For unionised employers, the priority is understanding the imminent changes to industrial action rules and reassessing risk and response planning.

For non-unionised workplaces, preparation should focus on:

• Reviewing contracts, variation clauses and probationary provisions
• Strengthening probationary processes ahead of the six-month unfair dismissal threshold
• Training managers on upcoming rights and obligations
• Planning policy updates for family leave, sickness absence and harassment
• Auditing payroll and benefits systems in light of SSP reform

Further reading

• ‘Day one’ unfair dismissal dropped and compensation cap removed – Hunter Law
• Revised rollout of the Employment Rights Bill – Hunter Law
• Read the implementation document in full.
• Employment Rights Bill – Top 8 significant changes – Hunter Law
• Employment Rights Bill: factsheets – GOV.UK
• Post General Election update – How will a Labour Government impact your workplace? – Hunter Law

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