Employment Rights Act 2025: the complete guide for HR leaders and managers

The Employment Rights Act 2025 received Royal Assent on 18 December 2025. It introduces 28 major reforms to UK employment law - affecting an estimated 18 million workers - and the first wave hits on 6 April 2026.¹⁴ With days to go, most HR teams are still catching up.

The CIPD's Winter 2025/26 Labour Market Outlook found that 74% of employers expect the Act to increase employment costs, while 37% plan to reduce permanent hiring as a direct result.² Acas CEO Niall Mackenzie has called it "the biggest shake-up to employment law in a generation."³

This guide breaks down every reform that matters to your HR team, explains the implementation timeline from April 2026 through 2027, and gives you a practical 10-step preparation checklist organized by deadline. Whether you're responsible for compliance training, policy updates, or manager readiness, this is the resource to bookmark.

Why training managers - not just HR - is critical

Most organizations are making the same mistake right now: briefing HR and stopping there.

HR sets the policies. Managers execute them every single day. They're the ones taking the sick call on a Monday morning. Approving paternity leave on the spot. Handling the underperformance conversation. Deciding whether to extend a probation period.

Under the Employment Rights Act, every one of those decisions now carries greater legal weight.

The two-year safety net is gone

Before this Act, a new hire needed two years of continuous service before they could bring an unfair dismissal claim. That gave managers a wide margin for error during the early months. From 1 January 2027, that qualifying period drops to six months - and applies retrospectively to anyone who has already reached six months of service by that date.⁶

For managers, the informal "we'll figure it out during the probation period" approach is over. Every performance conversation, every exit decision, and every disciplinary step must be documented and procedurally sound from the start.

Uncapped compensation

The previous statutory cap on unfair dismissal compensation was the lower of 52 weeks' gross pay or £118,223.⁶ That cap has been removed entirely under the Act. A single manager who skips a proper process can expose the business to an uncapped claim.

SSP decisions now start from day one

From 6 April 2026, statutory sick pay is payable from the first day of sickness absence. The three unpaid waiting days are gone. The lower earnings limit is abolished.⁷ Managers who previously told staff "you don't get paid for the first three days" will be giving incorrect advice - and the Fair Work Agency will have enforcement powers over SSP compliance.

The gap between policy and practice

That guidance can't stop with HR. Every line manager who makes decisions about leave, absence, performance, or exits needs to understand the new rules. Untrained managers are where tribunal claims, enforcement penalties, and uncapped compensation awards originate.

The stakes are already visible in the data. The same CIPD survey found that 55% of employers expect workplace conflict to increase because of the Act's reforms - yet only 4% believe the new trade union measures will decrease disputes, despite the government's own impact assessment predicting the opposite.²

The 7 reforms every HR leader needs to prioritize

The Employment Rights Act contains 28 reforms. Not all of them will affect your organization equally. These seven will have the widest impact across HR operations.

1. Statutory sick pay overhaul (6 April 2026)

In the Acas/YouGov survey of over 2,000 employers and workers, 43% of employers identified SSP changes as the reform with the biggest workplace impact - ahead of unfair dismissal, paternity leave, and every other measure in the Act.³

What's changing:

• No more waiting days. SSP is payable from the first day of sickness absence, not the fourth.⁷
• Lower earnings limit abolished. All employees qualify regardless of income. The government estimates this brings 1.3 million additional workers into SSP eligibility.⁴
• New calculation method. SSP will be paid at the lower of the flat statutory rate (rising to £123.25 per week from April 2026) or 80% of an employee's normal weekly earnings.⁷

Why it matters for HR: The government estimates these changes will cost employers approximately £450 million annually - roughly £15 per employee per year.⁴ But the operational impact may be larger than the financial one. Payroll systems need updating. Sickness absence policies need rewriting. And managers need to stop telling employees they won't be paid for the first three days.

Employers offering enhanced contractual sick pay should review whether existing policies need adjusting to align with the new SSP framework. For organizations with high volumes of short-term absence - particularly those with large, lower-paid, or part-time workforces - the cost exposure will be significant.

2. Unfair dismissal qualifying period reduced to six months (1 January 2027)

The qualifying period for ordinary unfair dismissal claims drops from two years to six months of continuous service.⁶ This applies retrospectively: any employee who has reached six months of service by 1 January 2027 will gain protection on that date.

The compensation cap is also being removed. Previously capped at the lower of 52 weeks' gross pay or £118,223, the compensatory award for unfair dismissal will no longer have a statutory ceiling.⁶ The basic award remains unchanged, but the overall risk profile of dismissals - particularly for senior or high-earning employees - shifts dramatically.

What HR should do now: Probation processes need to be tightened now. Performance management must be documented from week one. Every dismissal decision needs to be based on a fair reason, follow a fair process, and be proportionate. The informal approach many employers took during the two-year qualifying window is no longer viable.

3. Fire and rehire restricted (1 January 2027)

Dismissing an employee and rehiring them on worse terms will become automatically unfair in most cases. This applies specifically to "restricted variations" - core contractual terms covering pay, pensions, working hours, and shift patterns.⁸ Changes to duties or place of work are not restricted variations, though they remain subject to the ordinary unfair dismissal test.

This reform was originally scheduled for October 2026 but has been pushed back to January 2027, aligning it with the unfair dismissal changes.¹⁰

The practical impact: If your organization needs to change employment terms that fall within the restricted categories, the consultation and justification requirements are now much higher. Unilateral changes carry a direct route to an automatically unfair dismissal finding - and the only exception is where the business faces genuine financial difficulties threatening its viability as a going concern.

4. Day-one family rights (6 April 2026)

Paternity leave and unpaid parental leave become day-one rights. The current 26-week qualifying period for paternity leave is removed entirely.¹ In the Acas survey, 28% of employers ranked this as the third most impactful reform.³

Where the operational risk sits: Onboarding processes need updating to inform new hires of their immediate entitlements. Managers need to know they cannot refuse a paternity leave request from a day-one employee. Workforce planning for cover will require earlier conversations.

5. Stronger sexual harassment prevention duty (October 2026)

The existing duty on employers to prevent sexual harassment is strengthened from "reasonable steps" to "all reasonable steps."⁹ Protection against third-party harassment is also reinstated - meaning employers can be liable for harassment by clients, contractors, or customers if they haven't taken all reasonable steps to prevent it.

What changes in practice: This raises the bar from reactive to proactive. HR teams will need to document the specific steps they've taken to prevent harassment, including training, reporting mechanisms, and risk assessments. The difference between "reasonable" and "all reasonable" will be tested in tribunals.

6. Extended tribunal time limits (October 2026)

The time limit for bringing most employment tribunal claims extends from three months to six months.¹ The Acas Early Conciliation period has already been extended from six weeks to twelve weeks as of December 2025.

The risk for HR teams: More employees will have time to bring claims. Combined with the reduced unfair dismissal qualifying period, this is expected to increase the volume of tribunal claims in a system that is already stretched. Thorough record-keeping and consistent process become even more important.

7. Whistleblowing protections expanded (6 April 2026)

Sexual harassment disclosures are now explicitly covered under whistleblowing protections. Workers who report harassment through whistleblowing channels gain additional protections against detriment and dismissal.¹

What to update: Whistleblowing policies need reviewing to ensure they reference the expanded scope. Training for managers on how to handle disclosures properly - without retaliation - is essential.

Employment Rights Act timeline: when every change takes effect

The Act is being implemented in phases. Below is the confirmed timeline based on the government's updated implementation roadmap published in February 2026.¹⁰

The Fair Work Agency: a new era of enforcement

On 7 April 2026, the Fair Work Agency (FWA) launches as a new enforcement body under the Department for Business and Trade. Chaired by Matthew Taylor, the FWA represents a fundamental shift from complaint-driven enforcement to proactive monitoring.⁵

What the FWA replaces

The FWA consolidates several existing enforcement bodies into one: HMRC's National Minimum Wage enforcement team, the Gangmasters and Labour Abuse Authority (which will be abolished), and the Employment Agency Standards Inspectorate. For the first time, it also brings state enforcement of holiday pay and statutory sick pay under one roof.¹¹

What powers the FWA has

The FWA has enforcement powers that should change how every HR team approaches compliance:

• Workplace inspections. The FWA can enter premises, require employers to produce records, and compel individuals to attend interviews.⁵
• Underpayment notices and financial penalties. Where an employer has failed to pay a statutory entitlement, the FWA can issue a notice of underpayment requiring repayment within 28 days - and impose penalties of up to 200% of the underpayment value.⁵
• Tribunal claims on behalf of workers. The FWA can bring employment tribunal claims against employers directly - even where workers are unwilling or unable to bring claims themselves.¹¹
• Legal assistance. The FWA can support workers or groups of workers in tribunal proceedings.
• Criminal enforcement. For serious breaches, sanctions can include fines and imprisonment. Knowingly producing false records is a criminal offense under the Act.¹²
• Cost recovery. The FWA can reclaim enforcement costs from employers where tribunal claims succeed.

6-year record-keeping requirement

The new six-year record-keeping requirement for holiday pay compliance is a criminal offense to breach. Make sure your HR systems can produce audit-ready records on demand.

What this means for HR teams

The FWA shifts enforcement from reactive (waiting for employees to complain) to proactive (the state coming to check). As Farrer & Co noted, employers should expect the FWA to take a more "interventionist mandate" than the fragmented bodies it replaces.¹³

For HR teams, the practical implications are clear: record-keeping, payroll accuracy, and SSP compliance need to be audit-ready at all times. The FWA's ability to bring claims on behalf of workers - without the worker needing to act - means that even employees who would never have brought a claim themselves could see one brought on their behalf.

A 10-step HR preparation checklist

The scale of these reforms can feel overwhelming. Breaking them into sequential steps, prioritized by deadline, makes the process manageable.