Employment Rights Act 2025: A Detailed Guide For Employers And Why Hiring Decisions Matter More Than Ever

The Employment Rights Act 2025 introduces one of the most significant shifts in UK employment law in more than a decade. With more than thirty changes being phased in across April 2026, October 2026 and January 2027, employers across England, Scotland and Wales will need to adapt quickly.

It is anticipated that the Act will cost UK businesses around £1bn.

For employers and team managers, these changes do not just affect HR 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.

This guide breaks down the key changes in detail, using insights from the FSB and Markel Law employment lawyers, and explains why employers should be reviewing their hiring and onboarding processes now.

1. Unfair Dismissal: Qualifying Period Reduces To Six Months (January 2027)

From 1 January 2027, the qualifying period for ordinary unfair dismissal will reduce from two years to six months. This is one of the most impactful changes for employers.

What this means in practice

• Any employee in your organisation on 1 January 2027 will automatically have unfair dismissal rights.

• An employee hired on 1 July 2026 will gain unfair dismissal protection by 1 January 2027.

• The original proposal for day one unfair dismissal rights was amended following extensive consultation, but the six month threshold still significantly shortens the window for employers to assess suitability.

  
  

Why this increases the importance of hiring well

A shorter qualifying period means:

• Less time to identify performance issues.

• Less time to correct poor fit or capability concerns.

• Less flexibility to release unsuitable hires without legal exposure.

For sectors where technical competence, safety, compliance and precision matter, the cost of a poor hire becomes even higher.

What employers should prepare for now

• Strengthen probation processes and ensure they are actively managed.

• Improve documentation around performance, conduct and capability.

• Ensure managers understand dismissal procedures and legal thresholds.

• Review onboarding to ensure new hires are set up for success quickly.

  
  

2. April 2026: Phase One Changes

April 2026 introduces several major updates that affect day one rights, statutory payments and enforcement.

2.1 Statutory Sick Pay Becomes A Day One Right

Currently, SSP is only payable from day four of absence and only to employees earning above the lower earnings limit. From April 2026:

• SSP will be payable from the first day of sickness.

• The lower earnings limit will be removed.

• All employees will qualify regardless of earnings or hours.

  
  

Impact on employers

This will increase SSP costs, particularly for businesses with:

• High numbers of part time or variable hours staff.

• Seasonal or shift based workforces.

• Physically demanding roles where minor illness is more common.

  
  

The Fair Work Agency will also have the power to enforce statutory payments, increasing the importance of accurate record keeping.

Why this links back to hiring

Employees who are unreliable, disengaged or poorly suited to the role are more likely to have higher short term absence. Strong assessment and selection processes reduce this risk.

What employers should prepare for now

• Update sickness policies and remove references to waiting days.

• Train managers on early absence conversations.

• Strengthen absence tracking and SSP record keeping.

• Review the financial impact of increased SSP costs.

  
  

2.2 Day One Paternity Leave

From April 2026:

• Employees will no longer need six months service to take paternity leave.

• They will still need six months service to qualify for statutory paternity pay.

  
  

Impact on employers

New starters will be able to take leave immediately, which may affect:

• Workforce planning.

• Shift cover.

• Production schedules.

  
  

Why this links back to hiring

Clear communication during onboarding becomes essential. Employers need to ensure new hires understand entitlements, processes and expectations.

2.3 Day One Unpaid Parental Leave

The current one year service requirement will be removed. Employees will have immediate access to up to eighteen weeks of unpaid parental leave per child.

Impact on employers

Although unpaid parental leave has historically low uptake, day one eligibility may increase usage, especially in sectors with younger workforces.

Why this links back to hiring

Employers need to ensure:

• Policies are clear.

• Managers understand how to handle requests.

• Workforce planning accounts for early service leave.

  
  

2.4 Creation of the Fair Work Agency

The Fair Work Agency will consolidate enforcement functions from:

• HMRC (minimum wage)

• Employment Agency Standards Inspectorate

• Gangmasters and Labour Abuse Authority

  
  

Key enforcement powers

• Requiring managers or directors to attend interviews.

• Inspecting records, systems and documents.

• Issuing underpayment notices.

• Applying penalties up to double the amount owed, capped at twenty thousand pounds per worker.

• Bringing tribunal claims on behalf of workers.

  
  

Impact on employers

This significantly increases the compliance landscape. Areas such as holiday pay, SSP, minimum wage and working time will face greater scrutiny.

Why this links back to hiring

Accurate job descriptions, clear contracts and structured onboarding reduce the risk of misunderstandings or disputes that could trigger enforcement action.

2.5 Protective Award Doubles For Collective Redundancy Failures

For employers proposing twenty or more redundancies within ninety days:

• The maximum protective award will increase from ninety days pay to one hundred and eighty days pay.

  
  

While this affects fewer SMEs, it is critical for any business planning restructuring.

3. October 2026: Phase Two Changes

The second wave of changes arrives in October 2026.

Key updates include

• A new duty to take reasonable steps to prevent sexual harassment.

• Restrictions on fire and rehire practices.

• Longer time limits for bringing tribunal claims.

• New rules on tips and service charges.

• Increased trade union access rights.

  
  

Why this links back to hiring

A strong hiring process reduces the likelihood of:

• Misconduct.

• Cultural misalignment.

• Poor behaviour that could lead to harassment claims.

• Disputes that escalate into tribunal claims.

  
  

4. Zero Hours Contract Reforms

Following consultation, expected changes include:

• A right to request a contract that reflects actual working patterns.

• Reasonable notice of shifts.

• Compensation for cancelled shifts.

  
  

Impact on employers

Businesses that rely on flexible labour will need to adjust scheduling, communication and record keeping.

Why this links back to hiring

Clear expectations at the hiring stage reduce disputes later. Accurate assessment of availability, reliability and flexibility becomes more important.

5. Why Hiring, Assessment And Onboarding Matter More Than Ever

Across all sectors, but especially in technical and manufacturing environments, 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.

  
  

For employers, this means:

• Better assessment at the front end reduces long term risk.

• Strong onboarding improves early performance and retention.

• Clear documentation protects against disputes.

• Structured hiring processes reduce the chance of unsuitable hires.

At PMB Manufacturing & Technical Recruitment, your focus on structured assessment, technical screening, capability mapping and onboarding support aligns directly with the challenges employers will face under the new legislation.

6. What Employers Should Start Preparing For Now

• Update policies on sick pay, family leave, redundancy and dismissal.

• Review contracts and handbooks for legal alignment.

• 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 ensure new hires are supported quickly.

• Plan for the financial impact of day one SSP.

• Prepare for increased enforcement activity from the Fair Work Agency.

  
  

Final Thought

The Employment Rights Act 2025 represents a major shift in employment law. For employers, it is not only a compliance challenge but also an opportunity to strengthen hiring, assessment and onboarding processes.

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 reduce risk and support long term success.

You can book time with us here:

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