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The Employment Rights Bill received Royal Assent in February 2025, becoming the Employment Rights Act 2025. This marks the most significant overhaul of UK employment law in decades, with phased implementation beginning April 2026 and continuing through 2027.
Key takeaway: The Act fundamentally reshapes workplace rights, from earlier unfair dismissal protection to enhanced family leave and new sexual harassment prevention duties. For recruitment teams and HR professionals, the time for preparation is now, not when deadlines arrive.
What is the Employment Rights Act 2025?
The Employment Rights Act 2025 is landmark legislation that introduces sweeping reforms to UK employment law. The Act creates new protections for workers, strengthens existing rights, and imposes significant new compliance obligations on employers of all sizes.
The legislation passed through Parliament and received Royal Assent in February 2025. However, most provisions will not take effect immediately. Instead, the Government has adopted a phased implementation approach, with key changes rolling out between April 2026 and January 2027.
The Act represents the Government's commitment to modernising workplace rights for the contemporary labour market. It addresses issues ranging from job security and family leave to workplace harassment and union rights. For recruitment teams, the implications are profound and far-reaching.
Why does the Employment Rights Act 2025 matter for recruitment teams?
This legislation will fundamentally alter how UK organisations recruit, onboard, and manage employees. The changes affect every stage of the employment lifecycle, from initial job offers through to termination procedures.
Key takeaway: Early preparation is essential because the reforms will increase legal risk, raise operational costs, and require significant changes to recruitment processes, employment contracts, and HR systems. Organisations that delay action face compliance failures, potential tribunal claims, and reputational damage.
The financial implications alone are substantial. Statutory sick pay changes will increase payroll costs from April 2026. Enhanced family leave entitlements will require budget adjustments and workforce planning. Most significantly, the removal of the compensation cap on unfair dismissal claims creates potentially unlimited financial exposure.
According to the Government's implementation roadmap, the reforms will affect millions of workers across all sectors. For recruitment teams, this means updating job offers, revising probation procedures, and implementing more rigorous candidate selection processes.
What are the key changes in the Employment Rights Act 2025?
The Act introduces multiple significant reforms across different areas of employment law. Understanding each change is essential for effective compliance planning.
Unfair dismissal rights from six months: Previously, employees needed two years' service before they could claim unfair dismissal. Under the new Act, this protection will apply after just six months of employment. This change is expected to take effect from 1 January 2027.
The Government initially proposed day-one unfair dismissal rights but compromised following employer concerns. Nevertheless, the reduction from two years to six months represents a dramatic shift that will fundamentally alter how organisations manage probationary periods and early-stage performance issues.
Removal of unfair dismissal compensation cap: Currently, unfair dismissal awards are capped at the lower of 52 weeks' pay or £118,223. The Act removes this cap entirely, creating potentially unlimited financial exposure for employers. This change will also take effect from 1 January 2027.
Enhanced statutory sick pay: From April 2026, the lower earnings limit for statutory sick pay will be removed, and the three-day waiting period will be eliminated. This means all employees will be entitled to statutory sick pay from day one of illness, regardless of earnings level.
Day-one family leave rights: From April 2026, employees will be entitled to paid paternity leave and unpaid parental leave from their first day of employment. Previously, these rights required qualifying periods of service.
Strengthened sexual harassment prevention duty: From October 2026, employers will face enhanced obligations to prevent sexual harassment in the workplace. This includes taking reasonable steps to prevent harassment by third parties, such as customers or clients.
Zero-hours contract restrictions: Expected in 2027, new regulations will restrict the use of zero-hours contracts and provide workers with guaranteed hours based on their typical working patterns over a reference period.
Fire-and-rehire restrictions: From October 2026, employers will face significant restrictions on dismissing employees and re-engaging them on inferior terms. This practice will only be permissible in limited circumstances.
Extended tribunal time limits: From October 2026, the time limit for bringing employment tribunal claims will extend from three months to six months. This gives employees significantly more time to pursue legal action.
Trade union rights: From October 2026, employers must inform all employees of their right to join a trade union. Unions will also gain enhanced rights of access to workplaces.
How do you implement Employment Rights Act 2025 compliance?
Implementing compliance with the Employment Rights Act requires a structured, phased approach. The following step-by-step process will help recruitment teams and HR professionals navigate the changes effectively.
Step 1: Conduct a comprehensive compliance audit. Begin by reviewing all employment contracts, employee handbooks, HR policies, and recruitment procedures. Identify areas that require updating to align with the new legislation. Pay particular attention to probation clauses, dismissal procedures, family leave policies, and flexible working arrangements.
Step 2: Create a detailed implementation timeline. Map all legislative milestones against your organisation's specific compliance requirements. Identify which changes take effect in April 2026, October 2026, and January 2027. Assign clear responsibilities for each task and set internal deadlines well ahead of statutory dates.
Step 3: Update all employment documentation. Revise employment contracts to reflect new rights and obligations. Update employee handbooks with enhanced family leave entitlements, revised dismissal procedures, and sexual harassment prevention policies. Ensure all documentation uses clear, accessible language that employees can easily understand.
Step 4: Upgrade HR and payroll systems. Ensure your technology infrastructure can accommodate the changes. Payroll systems must handle revised statutory sick pay calculations. HR platforms should track family leave entitlements from day one and manage extended tribunal time limits. Consider implementing compliance monitoring tools that provide alerts for upcoming deadlines.
Step 5: Develop comprehensive training programmes. Train all line managers on the new unfair dismissal protections, sexual harassment prevention duties, and revised probation procedures. HR teams require detailed training on legal obligations, documentation standards, and risk management. Consider using webinars, workshops, and practical resources like checklists and FAQs.
Step 6: Revise recruitment and selection procedures. With unfair dismissal rights applying from six months, recruitment decisions carry greater legal risk. Implement more rigorous candidate assessment methods, including structured interviews, competency-based testing, and thorough reference checking. Update job offers to reflect new rights and obligations.
Step 7: Establish clear communication channels. Inform all employees about the changes through multiple channels, including email bulletins, intranet updates, team briefings, and written guides. Create accessible FAQs that address common questions. Encourage employees to raise concerns and provide feedback.
Step 8: Implement robust record-keeping systems. Document all employment decisions thoroughly, particularly those relating to probation, performance management, and dismissals. Maintain clear records of flexible working requests, family leave applications, and harassment complaints. Good documentation is essential for defending tribunal claims.
Step 9: Review and adjust budgets. Calculate the financial impact of enhanced statutory sick pay, increased family leave entitlements, and potential tribunal awards. Adjust budgets accordingly and ensure adequate reserves for compliance costs, training expenses, and system upgrades.
Step 10: Monitor ongoing compliance. Establish regular review cycles to ensure policies remain current as further provisions come into force. Stay informed about consultation outcomes and regulatory guidance. Consider appointing a dedicated compliance officer or working group to oversee ongoing implementation.
What are the best practices for Employment Rights Act 2025 compliance?
Adopting best practices will help recruitment teams navigate the new landscape effectively whilst minimising legal risk and maintaining operational efficiency.
Strengthen your recruitment processes immediately. With unfair dismissal protection applying from six months, poor hiring decisions become significantly more costly. Implement structured interview techniques, use competency-based assessments, and conduct thorough background checks. Document all recruitment decisions clearly to demonstrate fair and objective selection processes.
Review probationary periods strategically. Ensure probation periods are long enough to assess new employees thoroughly but structured to allow early intervention when issues arise. Conduct formal reviews at regular intervals, such as one month, three months, and five months. This allows time to address concerns well before the six-month threshold.
Document everything meticulously. Maintain detailed records of all employment decisions, particularly those relating to performance, conduct, and dismissals. Document the reasons for rejecting flexible working requests, refusing family leave applications, or terminating employment during probation. Good documentation is your best defence in tribunal proceedings.
Implement proactive harassment prevention measures. Don't wait until October 2026 to address sexual harassment prevention duties. Develop clear policies now, establish confidential reporting channels, and train all staff on acceptable workplace behaviour. Take swift action on complaints and maintain thorough investigation records.
Communicate changes clearly and consistently. Employees need to understand their new rights and how these affect them. Use plain English, avoid legal jargon, and provide practical examples. Offer multiple communication channels to ensure all employees receive information, including those working remotely or on non-standard contracts.
Engage with Government consultations actively. Many details of the Act remain subject to consultation. Monitor official guidance from the Department for Business and Trade, ACAS, and GOV.UK. Participate in consultations where possible to influence outcomes and gain early insight into regulatory expectations.
Seek specialist legal advice early. Employment law is complex, and the stakes are high. Engage employment law specialists to review your policies, advise on compliance strategies, and provide training. Early investment in legal advice will save significant costs later by preventing tribunal claims and compliance failures.
Build flexibility into your compliance plans. Regulatory guidance continues to evolve as consultations conclude. Avoid making premature assumptions about final requirements. Build flexibility into your plans so you can adapt quickly when official guidance is published.
What challenges might you face with Employment Rights Act 2025 compliance?
Implementing the Employment Rights Act presents several significant challenges for recruitment teams and HR professionals. Understanding these obstacles in advance allows for better planning and risk mitigation.
Challenge: Increased recruitment costs and time. More rigorous candidate selection processes require additional time and resources. Structured interviews, competency assessments, and thorough background checks all increase recruitment costs. However, these investments are essential given the increased legal risk of poor hiring decisions.
Solution: Budget for increased recruitment costs now. Consider investing in recruitment technology that streamlines candidate assessment whilst maintaining rigour. Train hiring managers in efficient but thorough selection techniques.
Challenge: Managing probation periods effectively. With unfair dismissal protection from six months, organisations have less time to identify and address performance issues. Managers must conduct more frequent reviews and document concerns promptly.
Solution: Implement structured probation review schedules with formal checkpoints at one, three, and five months. Provide clear performance expectations from day one. Train managers to address concerns early rather than waiting until the end of probation.
Challenge: Financial impact of enhanced entitlements. Removing the statutory sick pay lower earnings limit and waiting period will increase payroll costs. Enhanced family leave entitlements create additional budget pressures. The removal of the unfair dismissal compensation cap creates potentially unlimited financial exposure.
Solution: Model the financial impact now and adjust budgets accordingly. Consider reviewing absence management procedures to minimise sick pay costs legitimately. Ensure adequate insurance cover for tribunal claims.
Challenge: System and technology limitations. Many existing HR and payroll systems cannot accommodate the new requirements without upgrades or replacements. This creates both financial costs and implementation challenges.
Solution: Audit your current systems immediately to identify gaps. Obtain quotes for necessary upgrades and factor these into budgets. Begin implementation early to allow time for testing and staff training.
Challenge: Manager capability and confidence. Line managers often lack the legal knowledge and practical skills to navigate complex employment law changes. This creates significant compliance risk, particularly around dismissals and harassment prevention.
Solution: Invest in comprehensive manager training now. Provide practical tools like decision-making flowcharts, documentation templates, and FAQ resources. Establish clear escalation procedures so managers know when to seek HR or legal advice.
Challenge: Employee relations and communication. Communicating complex legal changes clearly whilst managing employee expectations is challenging. Miscommunication can create confusion, anxiety, and potential disputes.
Solution: Develop a structured communication plan with clear, simple messages. Use multiple channels to reach all employees. Provide opportunities for questions and feedback. Consider appointing employee representatives to help cascade information.
The Impact on Hiring: How the Employment Rights Act 2025 Transforms Recruitment
The Employment Rights Act will fundamentally reshape recruitment practices, talent acquisition strategies, and employer branding for UK organisations. Understanding these impacts is essential for recruitment teams preparing for implementation.
Recruitment process rigour becomes critical. With unfair dismissal protection applying from six months rather than two years, the cost of hiring mistakes increases dramatically. Poor recruitment decisions that previously could be corrected during a lengthy probation period now carry significant legal and financial risk.
Recruitment teams must implement more thorough candidate assessment methods. This includes structured competency-based interviews that assess candidates against clear, objective criteria. Psychometric testing and work sample assessments provide additional evidence of candidate suitability. Reference checking must be more thorough, with specific questions about performance, conduct, and reliability.
According to employment law specialists at Stephens Scown LLP, organisations should "tighten recruitment and pre-employment processes" because "it will be harder to terminate new hires quickly." This makes "robust recruitment processes and careful candidate selection more critical."
Probation periods require strategic redesign. Traditional probation periods of six months will no longer provide the same flexibility. Once an employee reaches six months' service, they gain unfair dismissal protection, making termination significantly more complex and risky.
Recruitment teams should work with HR to implement structured probation review schedules. Formal reviews at one month, three months, and five months allow early identification of performance or conduct issues. This provides time to address concerns through additional training, support, or ultimately termination before the six-month threshold.
Documentation during probation becomes absolutely essential. Managers must record all performance discussions, concerns, and improvement plans contemporaneously. This evidence will be crucial if dismissal becomes necessary and the employee subsequently brings a tribunal claim.
Talent acquisition strategies must adapt. The Act's provisions on flexible working, family leave, and workplace protections will influence candidate expectations and decision-making. Organisations that embrace these changes and communicate them effectively will gain competitive advantage in talent markets.
Employer branding should highlight enhanced family leave entitlements, flexible working opportunities, and robust harassment prevention measures. These factors increasingly influence candidate decisions, particularly among younger workers and those with caring responsibilities.
Recruitment marketing materials should clearly communicate the organisation's commitment to fair treatment, employee wellbeing, and legal compliance. This positions the employer as progressive and employee-focused, which attracts higher-quality candidates.
Hiring manager capability requires investment. Line managers who participate in recruitment must understand the new legal landscape and its implications for hiring decisions. They need training on structured interview techniques, objective decision-making, and thorough documentation.
Recruitment teams should develop clear guidelines for hiring managers, including interview question banks, candidate assessment frameworks, and decision-making criteria. These tools ensure consistency, reduce bias, and create defensible audit trails.
Onboarding processes need comprehensive updates. New employees must receive information about their enhanced rights from day one. This includes statutory sick pay entitlements, family leave rights, flexible working options, and trade union membership rights.
Recruitment teams should work with HR to develop comprehensive onboarding materials that explain these rights clearly. This demonstrates compliance, builds trust, and sets positive expectations for the employment relationship.
Candidate experience becomes more important. With extended tribunal time limits and enhanced employee protections, the risk of claims from unsuccessful candidates increases. Recruitment teams must ensure fair, transparent, and well-documented selection processes throughout.
Provide clear feedback to unsuccessful candidates where appropriate. Maintain thorough records of recruitment decisions, including reasons for rejection. Ensure selection criteria are objective, job-related, and applied consistently.
Retention strategies must align with recruitment promises. The recruitment process sets expectations about organisational culture, values, and employee treatment. Failure to deliver on these promises will increase turnover and potentially trigger tribunal claims.
Recruitment teams should work closely with HR to ensure recruitment messaging aligns with actual employee experience. This includes delivering promised flexible working arrangements, providing advertised development opportunities, and maintaining the supportive culture promoted during recruitment.
Frequently Asked Questions
Q: When exactly do the unfair dismissal changes take effect?
A: The reduction in the unfair dismissal qualifying period from two years to six months is expected to take effect on 1 January 2027. However, organisations should begin preparing immediately, as recruitment and probation procedures require significant lead time to implement effectively.
Q: Do the Employment Rights Act changes apply to small businesses?
A: Yes, most provisions apply to employers of all sizes. Some requirements, such as gender pay gap reporting and menopause action plans, apply only to organisations with 250 or more employees. However, core changes like unfair dismissal protection, enhanced family leave, and sexual harassment prevention duties apply universally.
Q: How much will the statutory sick pay changes cost employers?
A: Costs vary depending on workforce size and sickness absence rates. Removing the lower earnings limit and waiting period will increase statutory sick pay payments for all employers. Organisations should model the impact based on historical absence data and adjust budgets accordingly for April 2026 implementation.
Q: Can we still use probation periods after the Act takes effect?
A: Yes, probation periods remain lawful and advisable. However, they must be managed more carefully given that unfair dismissal protection applies from six months. Implement structured review schedules, document concerns promptly, and address performance issues early to allow time for resolution before the six-month threshold.
Q: What happens if we don't comply with the new requirements?
A: Non-compliance creates significant legal and financial risks. Employees can bring tribunal claims for unfair dismissal, discrimination, unlawful deduction of wages, and breach of contract. With the compensation cap removed, potential awards are unlimited. Organisations also face reputational damage, regulatory scrutiny, and difficulty attracting talent.
TL;DR Summary
- The Employment Rights Act 2025 received Royal Assent in February 2025, with phased implementation from April 2026 through January 2027, representing the most significant UK employment law reform in decades.
- Key changes include unfair dismissal protection from six months (effective 1 January 2027), removal of compensation caps, enhanced statutory sick pay from April 2026, day-one family leave rights, and strengthened sexual harassment prevention duties from October 2026.
- Recruitment teams must implement more rigorous candidate selection processes, restructure probation periods with formal review schedules, and update all employment documentation, contracts, and HR systems before implementation deadlines.
- Financial implications are substantial, including increased statutory sick pay costs, enhanced family leave entitlements, and potentially unlimited tribunal awards, requiring immediate budget adjustments and comprehensive compliance planning across all organisational functions.