Employment Rights Act 2025

Summary

The government has confirmed a six-month qualifying period for unfair dismissal. While this is not the day-1 protection they initially planned, it still represents a significant reduction from the previous two‑year threshold and materially strengthens early employment rights. This might be more challenging when it comes to site or project based employee

Impact on the construction sector

• Reduced flexibility to terminate short-term and/or site-based hires after the first six months.
• It may be difficult to balance the increased importance of structured onboarding, probation management and documentation with site or project based employees.
• Greater risk exposure where performance issues do not arise in the first 6 months or where other issues are discovered later down the line

Practical steps

• Prepare line managers to manage performance and conduct issues ideally from day 1 but from 6 months onward at the latest!
• Put in place robust probation processes tailored to site or project based roles and will need to ensure that they are followed.

Summary

The Act removes the statutory cap on unfair dismissal compensation, aligning claims with discrimination and whistleblowing. This increases the financial exposure associated with standalone unfair dismissal claims, however those claims are more unusual. Discrimination claims have also been uncapped for years, and it hasn’t increased the amount of claims being brought. So, there may not be as big a change as you might expect!

Impact on the construction sector

• Increased financial exposure in unfair dismissal disputes, particularly on large projects with senior or specialist staff.
• Greater litigation risk for poorly managed exits or informal site dismissals.

Practical steps

• Support line manager to ensure performance management or any other formal or informal process is documented and supported.

• Make sure that dismissal decision-making procedures are up to date, clear and in line with employment law.
• Factor potential increased liability into settlement and dispute strategies (if necessary).

Summary

The Act strengthens scrutiny of employment status, particularly where individuals are labelled as self employed but operate as workers or employees in practice.

Impact on the construction sector

• Increased risk of labour-only subcontractors, CIS operatives and long-term site-based contractors.
• Potential challenges to existing contractor models.
• Greater exposure to backdated claims (Holiday pay, sick pay, pension contributions).

Practical steps

• Ensure contracts and working practices align, particularly around control, substitution and mutuality of obligation, as well as with what is actually happening on the ground.
• Audit working practices across sites (control, substitution, integration).
• Review long-term contractor engagements.

Summary

Measures aimed at improving predictability and security of work may affect sectors, like construction, which are more reliant on agency labour and variable hours.

Impact on the construction sector

• Possible restrictions on zero-hours arrangements commonly used to manage fluctuating project demand.
• Increased obligations to offer predictable working patterns.
• Greater compliance requirements when using agency labour.

Practical steps

• Forward-plan workforce requirements across projects including greater due diligence when using agencies.
• Review agency contracts and assignment structures.
• Prepare for increased administrative compliance

Summary

Enhanced statutory sick pay and expanded family-friendly rights are likely to increase costs and administrative obligations.

Impact on the construction sector

• Higher payroll costs, particularly for SMEs and subcontractors.
• Operational challenges managing absence on live projects.
• Greater disruption risk to project delivery timelines.

Practical steps

• Forward-plan workforce requirements across projects including greater due diligence when using Build contingency planning into project resourcing and review absence management process.

Summary

The Government has indicated a more proactive enforcement regime, with increased penalties for non compliance.

Impact on the construction sector

• Increased risk of inspections and enforcement action.
• Greater exposure where pay, status or working time breaches occur.
• Reputational risk where breaches occur on high-profile projects.

Practical steps

• Ensure consistent compliance across all sites.
• Maintain clear records of status, pay and hours.
• Prepare for regulatory scrutiny.

Employee Incentive Schemes (EMIs) are a strategic initiative implemented by a company to reward, retain and recruit its employees for achieving specific goals, improving performance, or contributing to the overall success of the business.

How can we help?

• Enterprise Management Incentive (EMI) Scheme
• Setting up an EMI scheme
• Long Term Incentive Plan (LTIP)
• Company Share Option Plan
• Growth Share Schemes
• Schemes for Startups

The implementation of an EOT involves the transfer of shares in a trading company, from the original owners, to a trust. The trust then holds the shares on behalf of the employees of the company.

Herrington Carmichael have a specialised team who have represented many clients in various EOT transactions.

We are able to advise on all stages of the EOT process, including:

• providing initial guidance on whether the relief requirements as set out in s236H(4) TCGA 1992 are likely to be satisfied to allow CGT relief to be obtained;
• preparation of the HMRC clearance letter;
• management of the due diligence process;
• assisting in the explanation of the EOT process to employees;
• advising on the trust composition;
• drafting and negotiating transaction documents; and
• advising on post-completion requirements.

Our Franchise Solicitors regularly advise on:

• Reviewing and negotiating franchise agreements
• Advising on establishing franchise networks
• Drafting and reviewing operations manuals
• Disputes between franchisors and franchisees
• Franchise contracts and employment advice
• Franchise data protection
• Franchise sub-lease agreements

Our expertise in franchising enables us to provide our clients with up to date market advice and solutions which are proportionate to the business risks posed to them as well as ensuring that they are within budget.

Our bespoke service provides our clients with invaluable assistance in negotiating a franchise on favourable terms, whether we’re acting for the franchisee or the franchisor, rather than merely just attending to drafting the legal documentation.

Our corporate insolvency team has vast experience in both the contentious and non-contentious aspects of insolvency, recovery and restructuring, regularly helping clients through difficult distressed situations.

Herrington Carmichael provides its expert advice to licenced insolvency practitioners, private companies, individuals and creditors on a full suite of insolvency, recovery and restructuring arrangements.

How can we help?

• Administrations
• Company Voluntary Arrangements
• Creditor Claims
• Debt recovery
• Directors in insolvency
• Distressed M&A
• Enforcing security
• Insolvency disputes
• Liquidations
• Regulatory Advice 
• Statutory Demands
• Winding-up Petitions

Our International Legal Services continue to support our business growth and our network of clients and referrals worldwide.

Herrington Carmichael has a diverse client-base covering international organisations, entrepreneurial businesses and individuals. We regularly provide and coordinate advice on international legal projects across a range of jurisdictions.

We are a long-standing member of the IR Global network having established relationships with over 160 firms in all major jurisdictions across Asia, Africa, the Americas and Europe, meaning we are well equipped to provide international legal advice and support that’s tailored to your requirements.

We also support our client’s international requirements by working with like-minded independent law firms around the globe or their existing counsel. We work with firms that share our values and provide expert advice. We have invested considerable resources establishing relationships within our network so that we can be transparent and work without interruption to support your needs.

International Services:

• Business Lawyers 
• International Contracts
• Immigration Lawyers
• UK & International Property Lawyers
• Private Wealth & Family Lawyers
• Expat Legal Advice 

Our M&A team provides pragmatic, commercially-relevant and bespoke advice at all stages of M&A transactions. Whether it’s structuring a data room for a vendor-led staged process bidding process, negotiating on your behalf during an all parties meeting or advising on a sale or acquisition, our team will provide their commercially relevant knowledge throughout the transaction. We advise clients in all stages of their business lifecycles, ranging from rapid-growth start-ups to listed corporates allowing us to provide tailored corporate advice relevant to the unique circumstances of each of our clients.

The M&A team cover a wide range of transaction types, ranging from smaller transactions to multi-million pound, complex deals. One section of the team specialises in complex M&A which involves intricate consideration mechanisms, multiple phased transactions, reorganisation of group structures pre-acquisition and often in tandem with our overseas colleagues where the transactions have international elements.

Yavan Brar leads the complex M&A team, using his particular understanding of the law and his skillset in translating the clients’ desired commercial outcomes into the drafting.

Some recent M&A Corporate deal highlights:

• DataOps.Live – advice on their £70 million Series Seed funding round led by the west-coast US venture capital investor, Anthos Capital alongside co-investor, Snowflake Ventures
• $60 million – New York Stock Exchange listed SatixFy Communications Ltd advised on sale of SatixFy Space Systems UK Limited
• £21.2 million sale of national financial advisory business to market consolidator
• £10.5 million sale of self-storage asset to US private equity fund
• £8.2 million sale of market-leading travel agency
• £5.3 million trade sale of multi-generational steel business to key supplier
• £2.7 million acquisition of independent financial advisor business by expanding financial advisory network
• £400k sale of UK manufacturing branch of US-based private equity backed label business
• £250k pre-pack sale of the business and assets of a national EV station installer in administration
• £100k sale of the business and assets of an insolvent regional audio-visual installer during liquidation

Private Equity or Venture Capital firms often have strict rules that companies need to adhere to if they want to take the investment and so the drafting of the legal documents is complex and comprehensive work. Herrington Carmichael have a large team of lawyers who have expertise in dealing with private equity firms and venture capital funds.

Our expertise extends to navigating the intricate regulatory landscape for private equity and venture capital houses and their investors. We assist in establishing tax-efficient funds, collaborating with tax advisors to devise structures that align with contemporary practices in private equity.

In the UK, Private Equity (PE) and Venture Capital (VC) investments necessitate careful consideration of various regulatory factors to ensure adherence to local laws and regulations. Consideration of these UK-specific regulatory factors is crucial for successful PE and VC investments, especially when engaging with entities like NS&I. Collaborating with legal professionals well-versed in the UK regulatory landscape is essential to navigate these complexities effectively. Here at Herrington Carmichael, we have the necessary skills and experience to assist you completing these types of transactions successfully and efficiently.

At Herrington Carmichael, we understand the intricacies of corporate restructuring in the UK landscape. Trust us to tailor legal solutions that align with your business goals, enabling you to navigate changes effectively and emerge stronger. Your success is our priority.

Our expertise in corporate restructuring ensures your business navigates transformative changes seamlessly. Our tailored solutions encompass demergers, Employee Ownership Trusts (ETOs), mergers and acquisitions (M&As), and the strategic separation of property from trading operations.

Demergers
When businesses need to realign their structures, our legal team facilitates demergers, ensuring a smooth separation of entities to optimise efficiency and focus.

EOTs
EOTs empower businesses by facilitating the transfer of ownership to employees, fostering a sense of shared responsibility and commitment. We have extensive experience with these types of corporate structure allowing favourable outcome for owners, shareholders and employees.

Mergers and Acquisitions
Navigating the complexities of M&As demands legal finesse. Our experts guide clients through every stage, from due diligence to post-transaction integration, ensuring a seamless process.

Separation of Property from Trading
Efficiently separating property assets from trading operations is crucial. We provide strategic counsel to safeguard your interests and maximise operational effectiveness.

Core Business and Ancillary Separation
Identifying and separating core business functions from ancillary operations requires precision. Our team ensures a streamlined process, protecting your core assets and promoting sustained growth.

At Herrington Carmichael we have specialist SEIS and EIS lawyers who can assist with implementing your plans.

As companies look to grow, external investment is often turned to by businesses through the provision of extra capital to fund growth plans. However, many external investors are reluctant to invest in a business until they fully understand the consequences of doing so, which includes the taxation impact of the investment.

The Enterprise Investment Scheme (“EIS”) and the Seed Enterprise Investment Scheme (“SEIS”) are tax-efficient government-backed schemes which allow qualifying businesses to fundraise from investors who are tax-resident in the UK.