BREAKING: Employment Rights Bill Passes – Royal Assent expected before Christmas

December 17, 2025

Having navigated the final stage of the parliamentary “ping-pong” on 16 December 2025, the Employment Rights Bill is set for Royal Assent before Christmas and will become the Employment Rights Act (the “Act”).

This is the most substantial reform of workplace rights in a generation, highlighting the government’s focus on comprehensive protection for employees, workers, and trade unions.

Implementation roadmap and timeline:
DateChanges
Royal Assent– Immediate repeal of Strikes (Minimum Service Levels) Act and related provisions
April 2026– SSP reform
– Day-one family rights
– Launch of the Fair Work Agency
October 2026– Ban on fire-and-rehire
– All reasonable steps
– Guaranteed hours  
January 2027– Six-month unfair dismissal qualification comes into effect
2027– Flexible working enhancements
– Bereavement leave
– Menopause and gender pay action plans
Key provisions:

Unfair dismissal

Qualifying period

Among the most impactful reforms are those relating to unfair dismissal. Following extensive parliamentary debate, the government has confirmed that the qualifying period for bringing an unfair dismissal claim will be reduced from two years to six months, anticipated to come into effect from 1 January 2027. However, there are suggestions there could be earlier implementation in 2026.

Employers will effectively be managing a 6-month enhanced probation period. Employers should start preparing reviewing recruitment and probation processes imminently.

This marks a significant departure from the long-standing two-year threshold and will substantially increase the number of employees eligible to challenge dismissals.

Cap on the compensatory award

Equally significant is the abolition of the compensation cap for unfair dismissal claims. Compensation is currently limited by two mechanisms: a statutory cap of £118,223, or an alternative cap of 52 weeks’ pay, whichever is lower. Both limits will be removed, bringing unfair dismissal awards in line with discrimination and whistleblowing claims, which have long been uncapped.

This reform followed intense scrutiny in the House of Lords, where leading voices argued that uncapped awards in discrimination cases have not caused disruption, suggesting the same will hold true for unfair dismissal. For employers, this change dramatically increases potential financial exposure, making robust dismissal processes and proactive risk management more critical than ever.

A review within 3 months of Royal Assent will focus on the removal of unfair dismissal compensation caps before implementation.

Day-one rights to SSP, paternity leave, and parental leave

From April 2026, employees will gain day-one rights to paternity leave and unpaid parental leave, as the Act removes the previous service requirements for these entitlements. However, statutory paternity pay will not become a day-one right – the government rejected proposals to extend this change, meaning eligibility rules for paternity pay remain unchanged.

The Act also introduces major reforms to SSP. The lower earnings limit will be abolished, making SSP accessible to more employees, and the three-day waiting period will be removed so SSP is payable from the first day of sickness absence. SSP will continue to be paid at the lower of the prescribed weekly rate or 80% of normal weekly earnings, which may result in some employees receiving less than under the current system. Employers will need to update payroll systems, leave policies, and onboarding processes to ensure compliance with these changes by April 2026.

New family-friendly rights

The Act will introduce a major expansion of family-friendly protections, with several measures scheduled for implementation by 2027.

These include a new statutory right to bereavement leave, covering pregnancy loss before 24 weeks and extending to a wider group of individuals specified in future regulations. The Act also proposes enhanced protections during pregnancy, making it automatically unfair to dismiss a pregnant employee or a new mother for up to six months after returning to work, except in limited circumstances. However, the details of these protections remain subject to consultation and secondary legislation.

In addition, the Act will strengthen flexible working rights, aiming to improve access to arrangements that support work-life balance. These reforms sit alongside broader changes to zero-hours contracts and fire-and-rehire practices, reflecting the government’s commitment to creating a fairer and more secure employment landscape.

It is important to note that some measures (such as the enhanced dismissal protections for pregnant employees) are still under consultation and may vary in scope or timing. Furthermore, while the Act introduces day-one rights for paternity and unpaid parental leave, the government has confirmed that statutory paternity pay will not become a day-one entitlement.

Ban on “fire and rehire”

From October 2026, the Act will make it automatically unfair to dismiss an employee for refusing to accept a “restricted variation” to their contract (such as reductions in pay, changes to pension terms, working hours, or holiday entitlements) unless the employer can demonstrate that the change was essential to address severe financial difficulties threatening the business’s viability and that no reasonable alternative existed. This financial hardship exception sets a high bar, requiring employers to show the variation was necessary to eliminate, prevent, or significantly mitigate the impact of financial difficulties and that the need for change could not reasonably have been avoided.

It will also be automatically unfair to dismiss an employee in order to replace them with another individual, whether an employee, agency worker, or self-employed contractor, on less favourable terms, where the duties are the same or substantially the same as those of the dismissed employee.

Employers will be required to comply with the updated Statutory Code of Practice on Dismissal and Re-engagement, which tribunals will take into account when assessing compensation. Failure to follow the Code could result in an uplift of up to 25% in compensation awards. In addition, the maximum protective award for failing to collectively consult will double from 90 to 180 days’ pay, significantly increasing potential liabilities for non-compliance.

Trade unions and industrial relations

The Act will introduce significant changes to strengthen and modernise trade union rights. The statutory recognition process will be simplified by removing certain thresholds, including the requirement for unions to demonstrate majority support at the application stage, and replacing the 40% support threshold in recognition ballots with a simple majority of those voting.

The Act will also permit secure electronic balloting for industrial action and other union decisions, replacing postal ballots to improve accessibility and engagement among members.

In addition, unions will gain a new reasonable right of access to workplaces, allowing officials to meet workers for recruitment, representation, and organising purposes, subject to clear rules and reasonable notice, though organising industrial action remains excluded.

Further measures include repealing restrictions introduced by the Trade Union Act 2016, such as the 50% turnout requirement for industrial action ballots, aligning with the move to electronic voting. Together, these reforms aim to modernise collective bargaining and strengthen union engagement in the workplace.

All reasonable steps

Employers will have a new statutory duty to take “all reasonable steps” to prevent sexual harassment in the workplace, including harassment by third parties such as clients or contractors.

The Act will also introduce a power for regulations to define what constitutes “reasonable steps,” which is expected to include measures such as conducting risk assessments, publishing clear anti-harassment policies, implementing robust reporting systems, and ensuring effective handling of complaints. These regulations will provide clarity while taking into account factors such as employer size, sector, resources, and working environment.

This enhanced duty will make defending sexual harassment claims more challenging, as the standard of “all reasonable steps” is more demanding than the previous “reasonable steps” test. Employers who fail to comply may face significant consequences, including a 25% uplift in discrimination compensation awards and potential investigations by the Equality and Human Rights Commission.

Establishment of a Fair Work Agency

The Fair Work Agency, which will launch in April 2026, will be a central authority to oversee compliance with the Act’s wide-ranging reforms.

The Agency’s role will include providing guidance to employers and employees, monitoring adherence to new workplace standards, and supporting enforcement of rights such as the ban on fire-and-rehire and enhanced protections against harassment.

It is expected to act as a resource for best practice and a point of accountability, ensuring that the government’s commitment to fair and transparent employment practices is delivered in practice. For employers, this means engaging early with the Agency’s guidance and preparing for greater regulatory oversight as the new framework beds in.

Consultations

Before implementation of the Act, there will be additional consultations which will cover probation, flexible working, redundancy thresholds, and union access.

How will these changes impact employers?

Employers face a new landscape under the Employment Rights Act 2025, requiring proactive planning and policy updates.

The removal of the unfair dismissal compensation cap increases litigation risk and potential settlement values, making robust dismissal processes essential. With the qualifying period for unfair dismissal claims dropping to six months from January 2027 (or potentially earlier), recruitment and probation procedures must be tightened to manage early risk.

Compliance obligations will also expand, with new harassment protections, union rights, and redundancy rules coming into force from 2026, requiring updated policies and manager training.

Payroll systems and benefits frameworks must be aligned to reflect day-one entitlements to sick pay and family leave, while strategic workforce planning becomes critical as the ban on fire-and-rehire demands genuine consultation and evidence-based restructuring.

Finally, employers should actively engage in upcoming consultations on probation and flexible working to influence the detail of secondary legislation and prepare for implementation.

How we can help

For further information, or to discuss the issues raised within this update, please contact us to speak to a member of our Employment Team.

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Jo Boxhall
Solicitor, Employment
<script>
document.addEventListener('DOMContentLoaded', function () {
  const deptEl = document.getElementById('acf-author-department');
  const department = deptEl?.dataset?.department;

  if (typeof gtag === 'function' && department) {
    gtag('set', { author_department: department });
  }
});


  window.dataLayer = window.dataLayer || [];
  const dept = document.getElementById("author-department")?.textContent?.trim();
  if (dept) {
    window.dataLayer.push({
      event: "authorDataReady",
      author_department: dept
    });
  }

</script>
View profileContact Us

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Latest Legal Insights