The UK’s Employment Rights Bill received royal assent on December 18, 2025, becoming the Employment Rights Act 2025 (ERA 2025). Earlier, the Bill was approved in the House of Lords after an extended parliamentary process. The Employment Rights Act, 2025 aims to modernize workplace rights, strengthen worker protections, and promote fair pay and flexibility. It adds to and amends the existing legislation including Employment Rights Act, 1996.
Most of the changes made by the ERA will be implemented gradually over the next two years while a few changes will take effect immediately after the royal assent.
- Zero hours workers – Businesses are required to offer guaranteed hours to workers employed on zero-hours or very low-hours contracts in cases where workers regularly work more hours than those stated in their contract. Employers will also need to give reasonable notice when the shifts fall outside normal working patterns. If a shift is cancelled at a short notice, the worker must be paid compensation. These changes will also apply to agency workers. The changes will come into effect in 2027 after the relevant rules are finalized and notified.
- Flexible working – Under the existing law, employers can refuse flexible working requests based on one or more statutory grounds. The law now mandates the employers to demonstrate that the decision is reasonable the process was fair. Before refusing a request, employers are expected to discuss it with the employee explaining why it cannot be agreed. The government will be coming up with secondary legislation to lay down the process after consultation on this topic. The changes would take effect in2027.
- Unfair dismissal – From January 1, 2027, the eligibility to make unfair dismissal claim will be based on completion of six months of service, instead of earlier requirement of two years of service. The current unfair dismissal compensation cap (of either 52 weeks’ gross salary or GBP118,223, whichever is lower) may be removed.
- Fire and Rehire – Dismissal will be considered as unfair if it is based on employee’s refusal of certain changes to their contract, such as pay, hours, leave, pensions, or shift patterns, or if the employer plans to replace them with someone on different terms to do the same job. Employers can only justify such dismissals if they can show serious financial difficulties and that the changes were essential, backed by clear evidence. Law also introduces a new anti-avoidance rule whereby dismissingemployee to replace them with a non-employee in the same role will automatically constitute as unfair dismissal. These changes are expected to take effect in October 2026 after the government revises relevant code of practice after due consultation.
- Protection from harassment – Since October 2024, employers have been required to take “reasonable steps” to prevent sexual harassment at work. The regulations are expected to define what constitute reasonable steps which are likely to be implemented in 2027. The law will require employers to take all reasonable steps effective from October 2026. Employers will also be responsible for harassment by third parties, such as customers or clients, unless they have taken all reasonable measures to prevent it. Reporting sexual harassment will be protected under whistleblowing rules and rules for safeguarding employees from unfair dismissal or other detriment. The protection will be effective from April 2026.
- Non-Disclosure agreement – The Act will ban non-disclosure agreements (NDAs) that stop workers from reporting harassment or discrimination, including how their complaints were handled by the employer. The government has not yet announced when this ban will come into effect.
- Eligibility for leave and pay – From the first day of employment, workers will be entitled to paternity leave, parental leave, and bereavement leave including for pregnancy loss before 24 weeks. Employers will need to update HR systems and policies to reflect these new rights. The provisions relating to bereavement leave will take effect in 2027 after due consultation on eligibility and circumstances for taking it while day-one paternity and unpaid parental leave will come into effect from April 2026.
Further, statutory sick pay will be available from day one of sickness and waiting period will be removed. Further, eligibility requirement to earn at least equal to lower earnings limit has been removed. These changes will apply from April 2026.
- Collective redundancies – Employers will need to conduct collective consultation not only when twenty or more redundancies happen at a single site, but also when a new threshold (to be set in regulations) is reached across multiple locations. This means businesses will need to track redundancies across the whole organization. Employers will have flexibility to consult different employee representatives and reach agreement separately. The maximum protective award for failing to consult will double from 90 to 180 days’ pay, increasing the financial risk of non-compliance. Consultation on the new multi-site threshold is expected in Winter 2025/early 2026, with the protective award change coming in April 2026 and the new threshold rules following in 2027, supported by guidance.
- Pay Gap action plan – Currently, employers with 250+ staff must publish gender pay gap reports, while creating action plans to bridge such gaps is voluntary. Under the Act, these employers will now have to publish equality action plans to close pay gaps and support employees through menopause, with penalties for non-compliance. The government will consult further on the regulations, with voluntary plans starting in April 2026 and mandatory compliance from 2027.
- Employment Tribunal Claim –The time limit for making most Employment Tribunal claims (excluding breach of contract) will increase from three months to six months. This change is expected to take effect in October 2026.
- Other reforms: The law also introduces reforms relating to trade unions and industrial action and establishes Fair Work Agency for enforcement of employee rights. The government also plans to consult on certain other reforms like reforming non-compete clauses, workers right to switch off, etc.
Implications:•
- Many changes will not take effect immediately and secondary legislation is expected for implementation of the provisions. Employers need to track developments in this respect.
- Minimum service period for unfair dismissal claim has been reduced from 2 years to 6 months. Theemployer needs to be cautious about performance monitoring and feedback for employees on probation to avoid claims. Employers having employees earning higher salaries may face significant impact due uncapped compensation claims on the ground of unfair dismissal.
- Employers having zero or low contract hours employees will have to keep record of work hours and regularly review working hours to identify cases requiring guaranteed hours contract. Further it would affect the last-minute scheduling of work and increase the staffing costs due to compensation requirement.
- Day one right for parental, paternity and bereavement leave will necessitate changes to HR policies. Changes relating to sick leave and pay also need to be updated in HR policies.
- Added responsibilities on employer to take reasonable steps to avoid sexual harassment from third parties such as clients or customers, would need employers to reexamine their processes.