Employment Rights Act 2025

Qualification periods

The Act revises unfair dismissal rules by replacing the current two year qualifying period with a new six month requirement, following a House of Lords amendment accepted during parliamentary ping pong, despite Labour’s original commitment to make unfair dismissal a day one right. Employers will still need to provide written reasons for dismissal on request once the qualifying period is met, and the government also intends to make future changes to the qualifying period more difficult by requiring any variation to be made through primary legislation.

Unlimited compensation

The Act removes the existing limits on compensation for unfair dismissal, abolishing both the cap of 52 weeks’ gross pay and the statutory financial cap (currently £118,223), marking a major shift from the previously restricted awards, especially when compared with uncapped discrimination and whistleblowing claims. These changes do not affect the basic award or statutory redundancy pay, which will continue to be calculated using the existing formula based on age, length of service and weekly pay.

The Act removes the current one‑year qualifying service requirement for parental leave, making parental leave a day‑one right for all employees regardless of how long they have been employed.

The Act removes the 26-week service requirement for statutory paternity leave, making it a day one right from April 2026. It also changes the interaction between paternity leave and shared parental leave so that employees will no longer lose their entitlement to paternity leave and pay if they take shared parental leave first, allowing paternity leave to be taken even after shared parental leave has already been used.

The Act reforms statutory sick pay by making it payable from the first day of sickness rather than from day four, and by removing the lower earnings limit so that all employees, regardless of income, become eligible. Employees currently earning below the lower earnings limit (now £123 per week) will gain entitlement to SSP, but at a rate set at 80% of their weekly earnings for those below that threshold.

The Act clarifies that reporting sexual harassment can explicitly count as whistleblowing, adding it to the list of qualifying disclosures where the employee reasonably believes the disclosure is in the public interest and the other statutory tests for protected disclosures are met. While sexual harassment complaints could already amount to whistleblowing when framed as breaches of health and safety or legal obligations, this change makes protection more explicit and reinforces that disclosures about sexual harassment may attract whistleblower safeguards.

The Act increases the maximum protective award for failures in collective consultation from 90 to 180 days’ pay, doubling the potential liability for employers. However, it stops short of introducing interim relief as a remedy, despite earlier proposals suggesting this might be included.

The Act grants the government broad powers to enforce labour market regulations and delegate these responsibilities to a new public authority, expected to be called the Fair Work Agency. According to the Next Steps document, this agency will consolidate existing enforcement functions, including minimum wage and statutory sick pay enforcement, tribunal penalty schemes, labour exploitation and modern slavery oversight, employment agency regulation, and will introduce state enforcement of holiday pay for the first time. The Act also provides significant investigatory powers, such as the ability to enter premises, obtain documents, and inspect electronic records.

The Act introduces a new duty on all employers to keep records showing compliance with statutory holiday entitlement, including details of leave taken and holiday pay. Although no specific format is required, these records must be retained for six years, and failure to keep them will constitute a criminal offence punishable by potentially unlimited fines.

The time limit for bringing employment tribunal claims will be extended from three to six months for all claim types, including discrimination and unfair dismissal. However, the extension does not currently cover employee breach of contract claims.

The Act strengthens employers’ obligations to prevent workplace sexual harassment by requiring them to take all reasonable steps to protect employees and workers, raising the standard from the previous requirement of merely taking “reasonable steps.” The government is given the power to define what counts as reasonable steps through future regulations, supported by a call for evidence on effective measures to reduce and prevent sexual harassment in the workplace.

The Act makes employers liable for harassment of their employees by third parties such as customers, clients, or service users unless the employer can show it took all reasonable steps to prevent it. This represents a significant expansion from the previous position, where employers were not directly responsible for third party harassment, and it applies to all forms of harassment, not only sexual harassment.

The Act introduces new powers aimed at preventing a “two‑tier workforce” in public sector outsourcing, ensuring that employees transferring from the public sector are not treated less favourably than before, and that existing private‑sector workers delivering the same contract are treated no less favourably than those who transferred. Future regulations may require public service outsourcing contracts to include provisions enforcing this equal treatment.

Further detailed regulations and a supporting Code of Practice will follow to govern how these requirements are implemented.

The Act gives the government broad new powers to create an Adult Social Care Negotiating Body made up of employer and union representatives across the sector, with the ability for the Secretary of State to ratify any agreements it reaches on pay and terms so that they become binding on all adult social care employers in England. If the Negotiating Body cannot reach agreement, the Secretary of State will also have the authority to set pay directly, effectively allowing government mandated sector wide terms and conditions where negotiations fail.

The Act strengthens recent tipping legislation by requiring employers not only to pass all qualifying tips to workers but also to consult with trade union or elected representatives, or with workers directly where none exist, before introducing or reviewing their written tips policy. Policies must now be reviewed every three years, and employers must make an anonymised summary of consultation feedback available, adding greater transparency and worker involvement to how tips are allocated.

The new legislation significantly restricts employers’ ability to use “fire and rehire” to change key contractual terms, making dismissals automatically unfair where an employee refuses changes to protected terms such as pay, working hours, pensions, shift patterns, time‑off rights, and certain benefits, or where the employer seeks to impose flexibility clauses affecting these areas. A narrow exception applies only where an employer is facing serious financial difficulty threatening its viability.

Changes outside the protected categories are not automatically unfair, but tribunals must consider the reason for the change, consultation, and any compensation offered. TUPE related transfers and dismissals due to reduced work are excluded from the new ban, and the Code of Practice will continue to apply, with updates for these restricted circumstances.

Collective redundancy consultation threshold

The Act introduces a new threshold for triggering collective consultation, meaning employers must consult not only when proposing 20 or more redundancies at a single establishment, but also when a second, yet‑to‑be‑defined threshold is met. This new test will be set out in regulations and is expected to require counting employees across all sites, potentially using a percentage or higher numerical threshold (for example, the lower of 10% of the workforce or 100 employees across the business).

Guaranteed hours contracts

Whilst the Act stops short of banning zero hours contracts it is expected to reduce their use by requiring employers to offer qualifying workers a guaranteed hours contract that reflects the hours they have regularly worked over a defined reference period, with the same duty extended to agency workers.

Reasonable notice and compensation

The Act gives workers on zero hours, minimum hours, or otherwise irregular working patterns the right to reasonable notice of their shifts, including the timing, day, and number of hours, as well as reasonable notice of any changes or cancellations, with regulations to set minimum notice periods. Workers are also entitled to compensation for short notice cancellations or curtailments, provided they reasonably believed they would be needed.

Who this extends to

These protections will also apply to agency workers, with both the agency and end hirer responsible for giving notice, though cancellation related payments must be made by the agency (with the option of recovery from the hirer).

The Act requires employers to ensure that any refusal of a flexible working request is reasonable, although the existing eight statutory business grounds for refusal remain unchanged. Employers must explain both the specific ground relied upon and why it is considered reasonable in the circumstances. The legislation does not alter the penalties for failing to comply with these requirements.

The Act extends existing gender pay gap reporting by requiring employers with 250 or more employees to publish formal “equality action plans,” including specific plans to address their gender pay gap. While current law only obliges employers to report pay gap data and action plans have been optional, these new regulations will make such plans mandatory and introduce specific penalties for failing to publish them.

The Act retains the existing requirement for employers with 250 or more employees to publish annual gender pay gap reports but introduces a new obligation for those employers to identify the providers or employers of any contract workers engaged on the snapshot date. This does not extend to including contract workers’ pay in gender pay gap calculations; it simply requires naming the organisations that supply those workers.

The Act will require employers with 250 or more employees to create and publish menopause action plans as part of their broader Equality Action Plan, with regulations setting out the details and introducing specific penalties for employers who fail to comply.

The Act gives the government powers to introduce new regulations extending dismissal protections beyond redundancy to cover other types of dismissal during pregnancy, maternity leave, and the post return period, as well as for those on adoption leave, shared parental leave, neonatal care leave, and bereaved partners’ paternity leave. Although the detailed rules are still to come, the Act will require regulations to specify notice obligations, evidence requirements, and additional procedures employers must follow.

According to earlier explanatory notes, the intention is to ban dismissals of pregnant women, those on maternity leave, and for six months after returning to work, except in defined circumstances.

The Act gives the government powers to introduce a new day one right for employees to take at least one week of unpaid bereavement leave, with regulations to define the qualifying relationship, likely mirroring existing rules on time off for dependants. Unlike parental bereavement leave, this new entitlement will not be paid and importantly will cover pregnancy loss before 24 weeks, filling a gap in current law where no statutory leave exists for early pregnancy loss.

The Act introduces a formal legal definition of umbrella companies by amending the Employment Agencies Act, creating the foundation for further regulation following consultation. Once statutory regulation is implemented, umbrella companies will fall under the oversight of the Employment Agency Standards Inspectorate, with responsibility expected to transfer to the new Fair Work Agency once it is established.

The Act expands trade union officials’ rights to access workplaces physically and digitally for recruitment, organising (excluding industrial action), and collective bargaining, subject to a detailed statutory process. Unions may formally request access, after which employers must either negotiate an access agreement or face the union applying to the CAC, which is expected to presume access should be granted unless it would unreasonably disrupt the business.

The Act simplifies and lowers the thresholds for statutory trade union recognition by removing the requirement to show likely majority support and abolishing the rule that at least 40% of the entire bargaining unit must vote in favour in a recognition ballot.

The Act expands the mandatory written particulars employers must provide to workers by requiring an explicit statement informing them of their right to join a trade union. While current rules only require employers to state whether a collective agreement affects terms and conditions and carry relatively low penalties, the new duty will prescribe the content, format, timing, and method of providing this union‑rights statement through future secondary legislation.

The Act repeals the Strikes (Minimum Service Levels) Act 2023 and most of the Trade Union Act 2016, removing nearly all strike‑action restrictions introduced since 2010. It streamlines the information unions must give employers in ballot and industrial‑action notices, extends the validity of industrial‑action mandates from six to twelve months, and shortens the notice period required before taking industrial action from 14 to 10 days. It also permits electronic balloting, modernising the process and reducing administrative barriers for unions.

The Act fills the gap in existing law by giving workers protection from detrimental treatment short of dismissal when they take part in protected industrial action and also strengthens and simplifies protection against dismissal for participating in such action.

It further introduces a new statutory role for “union equality representatives” in workplaces with recognised unions, who will promote workplace equality, support members on equality issues, consult with employers, and be entitled to paid time off to perform these duties.

The Act makes any agreement that prevents a worker from reporting or making allegations about harassment or discrimination, including disclosures about how the employer handled such allegations, void, addressing long-standing concerns about NDAs being used to silence victims of sexual harassment.

The ban may be extended to cover independent contractors and those on work experience or training, and regulations may also set out limited “excepted agreements,” potentially following models like Ireland’s, where confidentiality clauses are only permitted at the worker’s request with independent legal advice.

The provision applies to harassment or discrimination by employers, colleagues, and likely third parties, and also covers victimisation, although the extent of protection for all forms of victimisation is not entirely clear from the wording.