Employment Rights Act 2025: What Employers And Workers Face

The long-running employment law shake-up has reached the statute books. On 18 December 2025 the Employment Rights Bill received Royal Assent and will now be known as the Employment Rights Act 2025 — but many of its details still need to be written. Big headline changes are already clear. The much-debated promise of unfair dismissal protection from day one has gone — employees will need six months’ service to bring a claim, not the 24 months previously in place. At the same time, the government will remove the current cap on compensation from January 2027, a move that has alarmed some business groups. There are wins for workers too. Statutory sick pay and parental pay will be payable from the first day of employment, and pregnant women and new mothers get strengthened protections. Employers will need to prepare for higher immediate costs, with the government promising guidance across 2026 and much secondary legislation still to follow. Fire-and-rehire won’t be outlawed outright but will face tighter limits. Employers who change certain core terms — such as contracted hours, pay, pension contributions, time-off entitlements and shift patterns — could now face unfair dismissal claims. Replacing staff with contractors, agency workers or others doing largely the same role will be banned except where a firm is in severe financial distress. Those rules are expected to take effect around October 2026. Zero-hours practices will also be curbed. If a worker regularly works more hours than their contract states, employers will be expected to offer a guaranteed-hours contract — though the government will set the detailed thresholds later. Rights to reasonable notice for shifts, and protection from sudden cancellations or changes, will be extended to agency staff. The reaction has been mixed. Unemployment has already ticked up to 5.1% (from 4.3% a year earlier), and some warn the new burdens could make firms more cautious about hiring. The Federation of Small Businesses and the British Chambers of Commerce remain wary, urging clarity and a phased rollout so smaller employers aren’t buried by simultaneous compliance tasks. Employment experts welcome the certainty but caution the practical work is only starting. Think tanks note the reforms could help millions — particularly women, disabled people, ethnic minorities and younger workers — but say the ultimate impact will hinge on the secondary legislation and codes of practice that follow. For now, businesses should begin reviewing contracts and HR processes so they’re not caught on the back foot when the next set of rules is published. --- Managing your business finances? TaxAce provides smart online accountancy services for UK businesses with flexible monthly plans. Image and reporting: https://smallbusiness.co.uk | Read original article