Employment Rights Act: What Happens Next and How Employers can prepare

After months of parliamentary debate and repeated amendments, the Employment Rights Bill has now completed its passage through Parliament and received Royal Assent on 18 December 2025. It is now formally law as the Employment Rights Act 2025.

The Act marks a significant shift in the UK employment landscape. However, while it is now law, most of its provisions will be implemented gradually throughout the next two years, in line with the Government’s roadmap and forthcoming secondary legislation.

With several key measures scheduled to take effect during 2026, and others following in 2027, now is a sensible time for employers to understand what lies ahead and ensure they are not caught off-guard as the changes begin to take effect.

Day One Rights from April 2026

Statutory Sick Pay will become payable from day one of sickness The lower earnings limit and waiting days for SSP will be removed Paternity leave and unpaid parental leave will become day-one rights for employees

From October 2026 (expected)

A strengthened duty on employers to take “all reasonable steps” to prevent sexual harassment, including harassment by third parties Reporting sexual harassment will become a protected disclosure under whistleblowing legislation New restrictions on dismissal and re-engagement practices (often referred to as “fire and rehire”)

Unfair Dismissal - Six-Month Qualifying Period from January 2027

The Act confirms that the qualifying period for ordinary unfair dismissal claims will be reduced from two years to six months. This change is expected to come into force on 1 January 2027.

There will be no transitional arrangements, meaning that anyone with six months’ service on or after that date will qualify for unfair dismissal protection. This replaces the Government’s earlier manifesto commitment to make unfair dismissal a day-one right.

Removal of the Compensation Cap

The Act also removes the statutory cap on compensatory awards for ordinary unfair dismissal claims.

Currently, compensatory awards are limited to the lower of:

52 weeks’ pay, or £118,233 (reviewed annually)

Once brought into force, there will be no statutory maximum. However:

• Tribunals will still be required to award compensation that is “just and equitable”
• Employees will continue to have a duty to mitigate their losses

The timing of this change has not yet been confirmed. The Government has indicated that further consultation and an impact assessment will follow.

The Fair Work Agency

The Act also introduces a new enforcement body: the Fair Work Agency.

The agency is expected to bring together enforcement of key employment rights, including:

• Holiday pay
• Statutory Sick Pay
• Day-one rights introduced under the Act

While its full powers and remit will be clarified through secondary legislation, the creation of the agency signals a move towards more proactive enforcement of employment protections.

Employers should anticipate increased scrutiny of record-keeping, payroll accuracy and statutory compliance. Even though the agency’s rollout will be phased, now may be a useful point to review existing systems and address any gaps.

Other Developments

• Extended time limits for certain Employment Tribunal claims (expected to increase from three to six months)
• Increased penalties for failures in collective redundancy consultation
• Expanded trade union rights and access provisions

What Employers Should Be Doing Now

Although Royal Assent confirms that these changes are now law, most will not apply straight away. Employers should view the coming months as a preparation phase, rather than a point at which immediate changes are required.

Key priorities include:

• Understanding the direction of travel, particularly around unfair dismissal risk
• Monitoring consultations and secondary legislation
• Ensuring policies, contracts and management practices can be adapted ahead of implementation dates

So, what to do now?

Cubed is better placed than many to help advise on and navigate through the 20+ reforms contained within the Bill.   Our approach has always been that of collaboration, knowledge sharing and peer to peer advice and support.  

We arrange and facilitate peer group round tables, provide gap and impact assessment tools, share best practice and innovation, connect likeminded leaders and businesses to work together to tackle and adapt to ever changing landscapes. 

For more information and insights I can be contacted at: steve@cubedtalent.co.uk