Employment Rights Act 2025: what the new law means for employers

Overview

The Employment Rights Act 2025 (ERA 2025) is described as "the biggest upgrade to workers' rights in a generation." It received Royal Assent on 18 December 2025 and introduces 28 significant employment reforms affecting every employer in England, Scotland, and Wales.

The Act does not take effect all at once. Implementation is phased over more than a year, with the first changes from Royal Assent itself and the last major reforms arriving in 2027. Employers must prepare for multiple deadlines.

Implementation timeline

Key implementation dates for employers:

Day-one employment rights (from 6 April 2026)

Several employment rights will be available from an employee's first day of work, removing existing qualifying periods:

• Statutory Sick Pay: Payable from day one of sickness (3-day waiting period removed). The lower earnings limit is abolished, so all employees qualify regardless of earnings. A new rate calculation applies: 80% of weekly earnings or the flat rate, whichever is lower.
• Paternity leave: Available from day one (currently requires 26 weeks' service).
• Parental leave: Available from day one (currently requires 1 year's service).
• Bereavement leave: New statutory entitlement from day one, extending the existing right (currently limited to parental bereavement) to cover a wider range of close relationships.

Zero-hours contract reforms

The Act introduces significant changes to zero-hours and low-hours contracts:

• Guaranteed hours: Employers must offer a contract reflecting actual hours worked over a reference period. Workers can accept or decline but cannot be penalised for accepting.
• Shift notice: Reasonable notice of shifts must be given. Short-notice cancellations require compensation.

Sectors with high use of zero-hours contracts — retail, hospitality, care, education, events, and logistics — will be most affected. Employers should begin auditing their current zero-hours arrangements and tracking actual hours worked.

Fire and rehire (from 1 October 2026)

Dismissing workers and rehiring them on inferior terms becomes automatically unfair dismissal from October 2026. The only exception is where the employer can demonstrate that the business would otherwise face serious financial difficulties amounting to an inability to carry on as a going concern.

Employers who need to change terms and conditions must follow genuine consultation and negotiation processes. Using the threat of dismissal as a negotiating tactic will be unlawful.

Harassment protections (from 1 October 2026)

Employers become liable for third-party harassment of their workers — including harassment by customers, clients, patients, and members of the public. The employer must take all reasonable steps to prevent harassment. This goes beyond existing duties which focus only on harassment by colleagues.

Employers should review harassment policies, provide training for customer-facing staff, and document the preventive steps they have taken.

Fair Work Agency (from 1 April 2026)

A new unified enforcement body — the Fair Work Agency — launches on 1 April 2026. It consolidates existing enforcement functions currently spread across HMRC, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate.

The Fair Work Agency will enforce:

• National Minimum Wage and National Living Wage
• Statutory sick pay
• Holiday pay
• Employment agency standards
• Modern slavery and labour exploitation

Unfair dismissal changes (from 1 January 2027)

From January 2027, the qualifying period for unfair dismissal claims reduces from 2 years to 6 months. The compensation cap is removed entirely, meaning tribunals can award uncapped compensation for unfair dismissal.

A new concept of initial period of employment applies during the first 6 months, allowing employers to use a lighter-touch process for fair dismissal during this period. However, employees are still protected from day one for automatically unfair reasons (pregnancy, whistleblowing, trade union membership, etc.).