The Employment Rights Act 2025: A Practical Guide for Employers

The Employment Rights Act 2025 received Royal Assent on 18 December 2025, and the clock is already ticking for UK businesses. While the Act’s changes roll out in stages across 2026 and 2027, the window for employers to prepare is shorter than most realise – and the consequences of getting it wrong have just become significantly more expensive.

This is not a piece of legislation to monitor at a distance. Some of its provisions will affect every business that takes on new staff, manages a probationary period, or employs anyone on a zero-hours or low-hours contract.

What Changed in April 2026

The first wave of reforms took effect in April 2026, with an immediate focus on family-related rights and workplace protections.

From April, employees will be entitled to paternity leave and unpaid parental leave from their first day of employment. Previously, qualifying periods applied to both. For businesses that take on new staff regularly, this change requires an immediate review of contracts and HR policies to ensure they do not inadvertently exclude entitlements that employees now hold from day one.

April 2026 also brings enhanced bereavement leave provisions, extending the right to time off to employees who lose the mother or primary adopter of a child. Separately, the Act strengthens whistleblower protections by reforming the public interest test – the threshold an employee must meet to qualify for protection when raising concerns about wrongdoing. The revised test is broader, and businesses should ensure that their policies for handling disclosures are up to date.

“Businesses that haven’t updated their employment contracts in a few years need to take action now,” says Michael Sandys, Corporate and Commercial Law Director at Vincents Solicitors. “The family leave provisions in particular are something every growing business should be addressing now.”

The Bigger Change: Unfair Dismissal From January 2027

The most significant reform for most employers arrives on 1 January 2027: the qualifying period for unfair dismissal protection drops from two years to six months.

The qualifying period for unfair dismissal will be reduced from two years’ continuous service to just six months, with the change taking effect from 1 January 2027. Crucially, the Government intends to extend protection immediately to employees who already have six months’ employment on that date – meaning anyone employed between now and July 2026 will gain unfair dismissal rights on 1 January 2027. For businesses hiring today, this is not a 2027 problem. It is a now problem.

The practical consequence is straightforward but significant. The two-year qualifying period has long been used – implicitly or explicitly – as a buffer during which underperforming new hires could be let go with minimal legal risk. That buffer is being cut by more than half. Employers will need to manage performance effectively before employees gain unfair dismissal protection at six months, rather than relying on the two-year window they have historically operated within.

“What concerns me most is that many businesses haven’t genuinely revisited their probationary processes in years,” says Michael Sandys. “They’ve relied on the two-year qualifying period as an informal safety net. When that net shrinks to six months, informal management of performance becomes a real liability. Businesses need structured probation procedures, regular documented reviews, and clear criteria for assessment – and they need them in place before January 2027, not after.”

The Compensation Cap Is Gone

A change that has received less public attention than it deserves: the Act also removes the existing cap on unfair dismissal compensation.
Currently, unfair dismissal awards are capped at the lower of £118,223 or 52 weeks’ gross pay. The removal of the compensation cap leaves awards unlimited in the same way as discrimination and whistleblowing claims, and will materially alter the cost and risk profile of senior exits in particular.
For businesses that employ senior staff on significant salaries, this is a material change to their legal risk exposure. A poorly handled dismissal that previously carried a capped liability could, from 2027, result in an uncapped tribunal award. Getting the process right has always mattered – it now matters considerably more.

Enhanced Protections for Pregnant Employees and Those Experiencing Menopause

2027 will also see new and extended protections for pregnant employees, new mothers, and employees going through the menopause. The details of implementation are still being confirmed through secondary legislation and consultation, but businesses should begin reviewing their policies in these areas during 2026.

“These provisions reflect a long-overdue recognition that the existing legal framework has not kept pace with how workplaces have changed,” says Michael Sandys. “From a commercial perspective, businesses that get ahead of these changes will also find it easier to attract and retain the staff they need – this is not just a compliance issue, it is a people management issue.”

What Businesses Should Be Doing Now

There are already steps employers can take: enhancing pre-employment screening and onboarding programmes, reviewing internal probation procedures to align with the new six-month qualifying period, and considering whether extensions to probationary periods beyond six months remain meaningful under the new rules.

For most businesses, the priority list looks like this: review and update employment contracts to reflect April 2026 day-one entitlements; overhaul probation processes before the end of 2026; assess the risk profile of any senior exits planned for late 2026 or early 2027 in light of the compensation cap removal; and ensure managers are trained on the new requirements before they take effect.

The Vincents commercial and employment team can advise on all aspects of the Employment Rights Act 2025 – from contract reviews and policy updates to managing the more complex implications of the compensation cap changes for senior roles.

For advice and more information email:
MichaelSandys@vincentssolicitors.co.uk and DrewBarrow@vincentssolicitors.co.uk