19.6.2026 | Law

The Employment Rights Act 2025 is arguably the biggest overhaul of employment law in a generation. It is likely to lead to an increase in tribunal claims, and employers will have significantly increased responsibilities. The changes cross a wide range of areas, strengthening rights and protections for employees.

The main changes are as follows:

Unfair Dismissal

Employees currently need two years’ service to bring most unfair dismissal claims. However, this is being reduced so that employees will only need six months’ service. The cap on compensation will also be removed (at the moment it is the lower of 52 weeks’ gross pay or the statutory cap (currently £123,543)). This means that all employees with 6 months’ service on or after 1 January 2027 will be able to claim for unfair dismissal, and compensation awards are likely to be higher.

Collective redundancy

A new threshold test will be introduced, requiring collective consultation if there are 20 or more redundancies at one establishment, or if another threshold test is met (as set out in the regulations). It will involve counting employees across all workplaces. Compensation for failure to comply with this (known as the protective award) has been increased from 90 days’ to 180 days’ gross pay from 6 April 2026.

Sexual harassment

The obligation to protect employees from sexual harassment will be extended, and employers will need to take “all reasonable steps” to prevent sexual harassment from October 2026. Failing to do so can lead to an uplift of up to 25% in any compensation awarded. 

Third-party harassment

There is currently no obligation on employers to prevent employees from being harassed by third parties; however, from October 2026, employers must take “all reasonable steps” to prevent such harassment in relation to all protected characteristics. Third parties include customers and suppliers.

Fire and rehire/ dismissal & reengagement

Where an employer wishes to change contract terms, they currently have the option (where changes aren’t agreed) to dismiss and then re-engage employees on the new terms. Significant restrictions on this are being introduced, meaning that, in many cases, a dismissal in which an employee has not agreed to key new contractual terms will be automatically unfair. There will be a limited exemption relating to financial difficulties.

Statutory Sick Pay

Statutory Sick Pay (SSP) is now payable from the first day of absence, and the waiting period and the lower earnings limit have been removed. This means more employees will be eligible for SSP. This came into effect from 6 April 2026.

Extension of Tribunal time limits

The time limit to bring a claim in the employment tribunal will be extended from 3 months to 6 months for all claims. This will mean employees will have more time to bring a claim.

There are a number of other changes being introduced (for example, regarding family-friendly rights and time off, flexible working requests, holiday records, zero-hours workers, and trade unions), and employers must be aware of these and comply with them once they are in force. The Fair Work Agency has also been established as of 7 April 2026, providing another avenue for enforcement action against employers, including fines for non-compliance.

The changes haven’t all come into effect yet, although some (including the changes to SSP) apply from 6 April 2026. We are awaiting further regulations and confirmation of many of the timescales. However, there are a number of steps that employers can take now:

1. Keep up to date with timelines and regulations.
2. Update policies and other documents to reflect the changes (while taking care with contractual changes due to the new restrictions on fire and rehire).
3. Put good recruitment practices in place now and manage probation periods effectively.
4. Think about what steps can be taken to prevent sexual harassment, including carrying out risk assessments.
5. Think about what can be done to prevent third-party harassment, for example, do any commercial contracts need to be reviewed?
6. Train staff.

For further information, please contact Keystone Law.

Kelly Sayers and Emma Loveday-Hill are both Partners at Keystone Law, specialising in employment law and HR issues.

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

Image L-R: Kelly Sayers and Emma Loveday-Hill.