After months of parliamentary back-and-forth, the Employment Rights Bill has finally cleared the House of Lords and has today (18th December 2025) received Royal Assent. It has now become the Employment Rights Act 2025 (ERA 2025) – a piece of legislation the Government has described as the most significant reform of workplace rights in a generation.

While many of the changes will not take effect immediately, the direction of travel is now clear. For employers, the question is no longer if change is coming, but how quickly you need to prepare.

Two late changes that matter

The Bill’s final passage brought with it two important amendments.

First, the qualifying period for ordinary unfair dismissal will not disappear entirely. Instead, it will reduce from two years’ continuous service to six months, with implementation expected from January 2027.

Second, and perhaps more significantly, the compensation cap for unfair dismissal – currently the lower of one year’s pay or £118,223 – is set to be removed altogether, subject to the Government publishing an Impact Assessment. If confirmed, this would fundamentally change the financial risk profile of unfair dismissal claims.

When do the changes start?

Although the ERA 2025 is wide-ranging, most of its provisions will be introduced gradually under a Government “roadmap”.

The only immediate change is the repeal of the Strikes (Minimum Service Levels) Act 2023.

In two months time, a first wave of industrial relations reforms will take effect. These include the repeal of most of the Trade Union Act 2016, simplified ballot and notice requirements for industrial action, enhanced protections against dismissal for taking industrial action, and the removal of long-standing restrictions on trade union political funds.

From April 2026, employers can expect more operationally visible changes, including:

  • Day-one rights to paternity leave and unpaid parental leave
  • Strengthened whistleblowing protection, expressly covering sexual harassment complaints
  • Statutory Sick Pay reform (no waiting days and no lower earnings limit)
  • The launch of a new Fair Work Agency
  • Increased penalties for collective redundancy failures

Further reforms are planned for October 2026, covering fire-and-rehire practices, tipping rules, expanded trade union rights, and a new duty on employers to take “all reasonable steps” to prevent sexual harassment.

As mentioned previously, the reduction in the qualifying period for ordinary unfair dismissal to six months is likely to take effect from January 2027. It is likely (although not confirmed) that the compensatory cap will be abolished at the same time.

2027 will also bring additional reforms such as enhanced protections for pregnant workers, expanded flexible working rights, bereavement leave, limits on zero-hours arrangements, and regulation of umbrella companies.

Why consultations matter more than ever

One often-overlooked feature of ERA 2025 is the scale of consultation still to come. Several consultations are already underway, including those on pregnancy-related dismissal protections and unpaid bereavement leave, while many more are expected during 2026.

Topics likely to be consulted on include fire-and-rehire restrictions, zero-hours practices, umbrella companies, tipping law reform, collective redundancy processes, and flexible working rights. For businesses likely to be affected, responding to these consultations is one of the few remaining opportunities to influence how the final rules will operate in practice.

What should employers be doing now?

Preparation looks different depending on whether your workforce is unionised.

For unionised employers, the immediate focus should be on understanding the imminent shift in industrial action rules – particularly the removal of turnout thresholds, extended ballot mandates, shorter notice periods, and broader protection against dismissal during strikes.

For non-unionised workplaces, change will arrive more gradually, but there is still work to do now:

  • Review whether any restricted contractual changes may be needed in the next few years, and whether action should be taken before fire-and-rehire reforms tighten the rules
  • Future-proof contracts by reviewing variation clauses and probationary provisions
  • Refresh probationary processes so managers are confident making decisions well before the new six-month unfair dismissal threshold
  • Begin training line managers on upcoming rights and duties
  • Plan updates to policies on family leave, sickness absence and harassment
  • Audit payroll and benefits systems in anticipation of Statutory Sick Pay changes

The bottom line

ERA 2025 is not a single “switch-on” moment but a rolling programme of reform that will reshape employment law over several years. HR teams who treat this as a long-term change project – rather than a last-minute compliance exercise – will be far better placed to manage risk and disruption as the reforms take effect.

To keep fully up to date with all the latest news on the ERA 2025, HR Inner Circle members enjoy free access to Daniel Barnett’s Employment Rights Act Update Service.