Four Key Areas of change in the Employment Rights Act 2025

On 18 December 2025, the new Employment Rights Act 2025 came into place. Changes in the Act will be introduced over the next 2 years (2026 and 2027) with the aim to give workers and their families more security in their jobs.

With over 28 major employment reforms across various areas, in this blog, we break down four key areas of changes and how employers and employees should prepare.

 

Family Leave & Sick Pay

In April 2026, paternity leave will become a ‘day one right’, allowing someone to give notice of leave from the first day of employment; it’s currently not until 26 weeks of working for an employer. This being said, doesn’t however mean employees will be entitled to paternity pay.

Parental leave – entitling you to 18 weeks’ unpaid leave for each child and adopted child up to their 18^th birthday – will also become a ‘day one right’. Currently, employees have to be at the company for 1 year. The restriction on taking statutory paternity leave after shared parental leave will be removed as well.

Statutory Sick Pay (SSP) will also paid from the first day of illness from April 2026, instead of the fourth day, and the lower earnings limit will be removed. Currently, the minimum amount an employee has to earn before being eligible for SSP is £125 per week. After April, all employees, regardless of income level, will be eligible for SSP.

These changes represent a shift in employer responsibilities. Businesses will need to review and update existing policies and employee handbooks, assess the financial impact on budgets and prepare for increased administrative demands on Payroll and HR teams. Without early planning, the effect of these changes could place additional strain on businesses, particularly those with large or flexible workforces.

 

Dismissal and re-engagement

From October 2026, dismissing someone and then rehiring them on worse terms and conditions will become an automatically unfair dismissal in most cases. This is sometimes colloquially known as ‘fire and rehire’.

Under the updated law, terminating employment to force agreement to detrimentally altered core terms such as pay, hours, pensions or shift patterns will generally be treated as automatically unfair dismissal unless the employer can meet a narrow ‘financial difficulty’ defence. There is an increased emphasis for employers to engage in a genuine consultation process and show they have considered alternatives before resorting to dismissal and re-engagement.

 

Unfair dismissal has changed

The government has announced that unfair dismissal will be changing in January 2027. It was originally thought that it would become a day-one right, but in December 2025, it was announced that the period of qualifying service necessary to bring a claim would be reduced from 24 months to six months.

The cap on compensation for these claims will also be lifted, which currently stands at the lower of either £118,223 or 52 weeks’ pay.

 

What is the unfair dismissal law?

Currently, the Employment Rights Act 1996 protects employees who have two years of service with a company from being unfairly dismissed. If an employee is dismissed before they have worked for their employer for two years, they will need to check what rights are available to them. This is sometimes known as ‘short service dismissal’.

According to the Resolution Foundation, other countries which have unfair dismissal protection typically have much shorter qualifying periods, reflecting the fact that it doesn’t take employers more than a few months to judge whether a new hire is a good fit. They added that getting rid of qualifying periods altogether would’ve been a step too far in the other direction, risking putting employers off hiring.

For employers, this change significantly shortens the window available to assess new hires. Businesses will need to adopt more structured onboarding processes, clearer performance expectations, and earlier performance reviews. Clear documentation and consistent management practices will be essential to reduce risk as well.

 

Flexible working

There will be an amendment to the flexible working law in 2027. If an employer rejects a flexible working request because of a genuine business reason, they’ll have to state the reasons and explain why they believe their refusal is reasonable. Doing this is already a good practice, but it will become a legal requirement next year.

This is seen by some to improve staff retention and so may benefit businesses. This may also reduce costs as the need for large office spaces could decrease. However, a survey by the BCC showed that 41% of businesses had increased their demands on staff attendance in the office over the past year. This change, coming into effect in 2027, means businesses must adapt to managing more hybrid teams.

 

How can TC Group help?

TC Group’s HR Advisory team can help guide you through these changes and ensure you feel confident getting processes in place in time for these changes, as well as hiring the right fit for your company.

We also offer HR Health Checks where our team will analyse the core functions of HR compliance within your business, diagnose the risks and prescribe solutions to help overcome your biggest HR concerns. From recruitment and onboarding through to employee engagement and wellbeing, the Health Check provides actionable recommendations to improve your HR policies and processes. To find out more about our HR Health Check, watch our video here.