Employment Rights Act 2025: A Detailed Guide For Employers And Why Hiring Decisions Matter More Than Ever
- Jan 29
- 4 min read
Updated: Feb 16
The Employment Rights Act 2025 represents one of the most significant shifts in UK employment law in more than a decade. With more than thirty changes being phased in across 2026 and 2027, employers across England, Scotland and Wales will need to adapt quickly. This expanded guide incorporates new information from recent legal briefings and HR webinars, including updates on wage changes, whistleblowing, sexual harassment duties, tribunal time limits, and fire and rehire restrictions.
For employers, these changes affect far more than compliance. They influence how organisations recruit, assess, onboard and retain talent. Poor hiring decisions will carry greater operational and legal risk, while strong hiring processes will become even more valuable.
It is anticipated that the Employment Rights Act 2025 will cost UK businesses in the region of £1bn.
1. Key Timeline of Changes
February 18th 2026: Trade Union Rights
Early changes include amendments to trade union and collective rights, covering balloting rules and public sector check-off arrangements. These arrive earlier than many employers expected.
April 1st 2026: National Living Wage Increases
New statutory rates:
Age 21+: £12.71
Age 18–20: £10.85
Under 18 and apprentices: £8.00
Employers should review pay structures to avoid accidental underpayments or compression between junior and supervisory roles.
April 6th 2026: Major Day One Rights Begin
This is the most significant date in Phase One.
Statutory Sick Pay (SSP)
SSP increases to £123.25.
SSP becomes a day one right.
The three-day waiting period is removed.
Employees can receive pro-rata SSP for one or two days off.
Workers earning below £123 per week may receive 80 percent of salary (proposal).
Paternity Leave and Unpaid Parental Leave
Both become day one rights.
Notice requirements and pay eligibility rules remain unchanged.
Fair Work Agency Launch
The new enforcement body will:
Allow employees to report issues directly.
Investigate statutory breaches.
Issue penalties up to double the amount owed, capped at £20,000 per worker.
Protective Award Increase
For collective redundancies involving 20 or more employees, the maximum protective award increases from 90 days’ pay to 180 days’ pay.
2. October 2026: Phase Two Changes
Duty to Prevent Sexual Harassment
Employers must take all reasonable steps to prevent harassment, including harassment by third parties such as customers or contractors. This is a higher threshold than current law.
Whistleblowing Protection for Sexual Harassment Complaints
Employees who report sexual harassment can now be protected under whistleblowing law, shielding them from dismissal or detriment.
Fire and Rehire Restrictions
Dismissal and re-engagement will become an automatically unfair dismissal unless strict criteria are met, such as extreme financial difficulty.
Tribunal Time Limits Extended
The time limit for bringing most tribunal claims will increase from three months to six months, significantly extending the period of legal uncertainty.
3. January 2027: Unfair Dismissal Changes
Qualifying Period Reduces to Six Months
From 1 January 2027, the qualifying period for ordinary unfair dismissal reduces from two years to six months. Any employee in post on that date will automatically gain unfair dismissal rights.
Removal of the Cap on Compensation
The government is expected to remove the cap on unfair dismissal compensation, increasing potential financial exposure.
Employers must document performance, conduct and capability concerns from day one.
4. Zero Hours and Low Hours Contract Reforms (2027)
Consultations are ongoing, but expected changes include:
Guaranteed hours based on actual working patterns.
Reference periods of 8 to 25 hours to establish minimum work patterns.
Compensation for short-notice cancellations.
5. Why These Changes Increase the Importance of Hiring Well
Across all sectors, the Employment Rights Act increases the cost of poor hiring decisions.
Key reasons:
Shorter unfair dismissal qualifying periods reduce flexibility.
Day one rights increase early service entitlements.
SSP changes increase financial exposure.
The Fair Work Agency increases enforcement risk.
Tribunal time limit extensions increase the likelihood of claims.
Fire and rehire restrictions reduce options for restructuring.
Strong hiring processes help employers:
Reduce early turnover.
Improve reliability and attendance.
Strengthen onboarding and early performance.
Minimise disputes and misunderstandings.
Ensure new hires are aligned with role expectations.
At PMB Manufacturing & Technical Recruitment, our structured assessment, technical screening and capability mapping help employers make better hiring decisions that stand up to the increased scrutiny created by the new legislation.
6. What Employers Should Start Preparing For Now
Update policies on sick pay, family leave, redundancy and dismissal.
Ensure policies are not contractual, making them easier to update.
Train managers on new rights and responsibilities.
Strengthen record keeping for pay, hours and entitlements.
Review hiring processes to ensure early suitability is assessed thoroughly.
Improve onboarding to support new hires from day one.
Audit payroll and holiday pay records before the Fair Work Agency becomes active.
Review workforce planning in light of day one leave entitlements.
Prepare for increased enforcement activity and longer tribunal claim windows.
Final Thought
The Employment Rights Act 2025 is not just a legal update. It is a fundamental shift in how employment relationships are structured and protected. For employers, it is an opportunity to strengthen hiring, assessment and onboarding processes to reduce risk and support long-term success.
If you would like to explore how to improve hiring decisions in light of these changes, we would be happy to talk through practical approaches that support compliance and build stronger teams.
You can book time with us here:
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