The Employment Rights Bill cleared its final Parliamentary hurdle, bringing the most comprehensive changes to workplace rights in a generation.
After months of intense debate between the House of Commons and House of Lords, and considerable input from businesses, trade unions and employer groups, the Bill has formally become law after receiving Royal Assent on 18 December 2025. and will reshape how we recruit, manage and support workers across every sector.
The Employment Rights Act 2025 is here with key changes being introduced in stages between 2026 and 2027. While some provisions won’t apply immediately, employers who begin preparing now will be far better placed to manage risk and adapt smoothly.
Below, we have outlined the key reforms introduced by the Employment Rights Act 2025 and what employers need to do to prepare.
A shorter route to unfair dismissal claims
One of the most debated aspects of this Bill has been around unfair dismissal protection. The government’s original manifesto promised of “day one” protection which sparked considerable concern from businesses, particularly smaller employers worried about the risks of hiring new staff.
Following extensive negotiations between Ministers, trade unions and business representatives, a compromise has been reached. Employees will now be able to bring unfair dismissal claims after six months of employment, rather than the current two-year requirement.
This is still a significant reduction that will likely increase the volume of tribunal claims. However, it gives a more manageable window to properly assess new hires and address any performance or conduct issues that arise during the crucial early months.
This does not prevent employers from dismissing staff during their first six months, but it does make robust probation processes more important than ever. Clear objectives, regular feedback and properly documented performance discussions will be essential once the six-month threshold is reached.
There’s a second major change that deserves attention: the government is removing the compensation cap for unfair dismissal claims entirely. Currently, awards are capped at the lower of 52 weeks’ pay or approximately £118,000 (adjusted annually for inflation).
Removing the compensation cap could significantly increase potential awards, particularly for high earners or cases involving substantial pension losses. For employers, this raises the financial risk of unfair dismissal and strengthens employees’ positions in settlement negotiations. The change is also likely to influence how tribunals approach compensation, with early cases providing important guidance.
Guaranteed hours for zero-hours workers
If you employ people on zero-hours or low-hours contracts, you’ll need to prepare for significant changes coming in 2027.
Workers will be entitled to a contract that reflects the average hours they actually work over a reference period expected to be around 12 weeks. Importantly, workers will retain the right to decline a guaranteed-hours contract if they prefer flexibility. The reforms aim to provide greater security without removing choice.
These provisions will also apply to agency workers, with responsibilities shared between employment agencies and the businesses they supply. In addition, new rights to reasonable notice of shifts and compensation for short-notice cancellations will be introduced.
If your business operates in hospitality, retail, events or agriculture – sectors that rely heavily on flexible staffing – staying informed as these regulations develop will be important.
Trade union reforms
Workers’ collective representation is strengthened by giving trade unions expanded rights to access workplaces. The Act gives independent trade unions a statutory right to access workplaces, both in person and digitally (e.g., via email or internal platforms) to meet, support, represent, recruit, or organise workers, as well as to facilitate collective bargaining. Access for the purpose of organising industrial action is explicitly excluded.
In addition, when a union submits a formal access request, employers must respond in writing within five working days. This is followed by a 15-working-day period for negotiation between the employer and the union.
For businesses, these changes mean union organising may become more visible in your workplace. Rather than viewing this as confrontational, we’d encourage thinking about it as an opportunity to understand what matters to your workforce and maintain positive employee relations.
What employers should do now
While many provisions won’t take effect until 2026 or 2027, there’s real value in starting your preparations now. Here are the practical steps we’re recommending t:
Review your recruitment and onboarding processes: With unfair dismissal protection kicking in at six months, your probation period becomes more critical than ever. Make sure you have clear objectives, regular review meetings and documented feedback throughout.
Audit your employment contracts and policies: Many standard contracts and policies will need updating to reflect the changes, probationary periods and to ensure that there is no reference to certain rights only applying after two years’ service. If you use zero-hours contracts, start thinking about how the guaranteed hours provisions might affect your workforce planning.
Train your managers on fair procedures and documentation: With changes to dismissal protection, managers must understand the importance of fair process, thorough documentation and effective performance management from the very start of employment. Consistent application across the organisation will be essential.
Consider your approach to flexible working: Review your approach to flexible working. Although the guaranteed hours reforms will not take effect until 2027, they signal a broader shift in how flexibility is viewed in employment. This is a good opportunity to assess whether your current arrangements genuinely meet the needs of both your business and your workforce.
How we can support you
We recognise that adapting to these reforms while continuing to run your business can be challenging. Our employment team can support you through this transition with practical, focused guidance.
We can help by:
- Reviewing and updating employment contracts to reflect the new legal requirements
- Auditing policies on flexible working, zero-hours contracts and the use of agency workers
- Delivering practical training for managers on performance management, fair dismissals and effective documentation
- Advising on approaches to trade union engagement where relevant
- Helping you assess the potential cost and workforce planning implications of the guaranteed hours reforms
Get in touch
The Employment Rights Act 2025 represents a significant shift in the employment landscape, but with proper preparation and the right support, businesses can adapt successfully to these changes.
We’re here to help you navigate these changes with confidence, ensuring your business remains compliant while maintaining positive, productive relationships with your workforce.
Get In Touch
Sylviane Kokouendo is an Associate Partner in the Employment & HR team. Sylviane has extensive experience advising clients on the full spectrum of employment-related matters from day-to-day HR issues to complex, high-stakes corporate transactions. She supports both employers and employees with contracts, policies, disciplinary and grievance matters, redundancy processes, restrictive covenants, settlement agreements and Tribunal proceedings.
If you’re concerned about how these reforms will affect your organisation, or you’d like to discuss our HR audit service and how we can support your business through this transition, please contact our employment team on 0330 111 3131 or via our online enquiry form.
