The Employment Rights Act 2025 received Royal Assent in December 2025, and its implementation timetable is already underway. Whether you employ one person or a hundred, the changes affect you — and the window to act responsibly is narrowing fast.
When the team at Carter Lemon Camerons briefed a group of international business leaders at their offices in the City, one theme cut through the legal detail with absolute clarity: these rules apply to every employer, regardless of company size.
For entrepreneurs growing their business in the UK — and for international founders setting up operations here for the first time — this is not background noise. It is a front-and-centre compliance challenge that demands action now, not later.
A Rolling Timetable: What Is Already In Force
Unlike a single Big Bang law reform, the Employment Rights Act 2025 is being rolled out in carefully sequenced phases. Understanding the timeline is the first and most critical step for any employer. The main changes affecting the smaller employer are set out below:
18 February 2025 (so in force now)
- The Trade Union Act 2016 is largely repealed, simplifying industrial action and political fund rules.
- Dismissals connected with industrial action are now automatically unfair.
- Employees gain early notice rights for Day 1 paternity leave and unpaid parental leave.
6 April 2025 (start of new tax year)
- Statutory Sick Pay (SSP) is payable from the first day of illness, not the fourth. The three-day waiting period is abolished.
- The lower earnings limit for SSP eligibility is removed, extending coverage to lower-paid workers.
- Paternity leave and ordinary parental leave become day-one rights — no qualifying period now required.
- Bereaved partners' paternity leave introduced: up to 52 weeks if the mother or primary adopter dies within the first year of a child's life.
- Whistleblowing protections for workers reporting sexual harassment are strengthened.
7 April 2025 — Fair Work Agency established
- A new government body with powers to inspect workplaces and fine employers for breaches of holiday pay, statutory sick pay, and the National Minimum Wage.
October 2025
- Employers become liable for sexual harassment of staff by clients or customers, unless they can demonstrate they took all reasonable steps to prevent it.
- Tipping law tightened: mandatory consultation before creating or updating a tipping policy in hospitality businesses.
- Workers must be informed of their right to join a trade union.
No earlier than October 2025 (date TBC)
- Employment tribunal time limits extended from three months to six months. With ACAS early conciliation, effective exposure extends to approximately seven months.
January 2027 — The major employer-facing changes
- Unfair dismissal qualifying period reduced from two years to six months.
- Compensatory award caps removed entirely — claims become open-ended.
- Fire-and-rehire banned except where an employer can prove financial necessity to prevent insolvency.
2027 onwards
- Enhanced dismissal protections for pregnant women and new mothers.
- Further flexible working reforms.
- Bereavement leave extended to cover pregnancy loss.
The Headline Change: Unfair Dismissal after Six Months
Of all the reforms, the January 2027 change to the unfair dismissal qualifying period will have the most profound operational impact on growing businesses. Currently an employee must have two full years of continuous employment before they can bring an unfair dismissal claim. From January 2027, that window shrinks to just six months.
Think of it this way: if you hire someone on 2 July this year, by 1 January 2027 — just over six months later — they will have full tribunal rights against you. The probationary period is no longer a buffer. It becomes your only structured window to assess, document, and — if necessary — act.
Employment contracts should already provide clearly for a probation period of no longer than six months, with formal reviews built in at the midpoint and before the end. Managers must be trained to assess performance throughout, not just at the final review meeting. Any decision to dismiss must be made and implemented before the six-month anniversary.
Importantly, discrimination, whistleblowing, and other protected-characteristic claims remain day-one rights. If there is any discrimination angle, a claim can be brought from the first day of employment — the new qualifying period offers no protection for those dismissals.
Uncapped Compensation: A New Financial Risk
Today, a successful unfair dismissal claimant can receive the lower of one year's pay or the statutory cap (currently around £118,000). From January 2027, those caps disappear. The financial exposure for a poorly managed dismissal will be open-ended and directly linked to the seniority and salary of the dismissed employee.
Tipping Tribunals over the Edge?
The additional work load which the changes are going to place on the tribunal system are going to be a challenge
"Sometimes you're two or three years off getting a final listing of your case. Unless there's a significant injection of judicial and administrative resource into the system, it's going to be a nightmare — and claims are estimated to rise by about 17%." — Carter Lemon Camerons, speaking at PBLINK Business Power Session
Practical Action Plan for Growing Businesses
Immediate — Before April 2026
- Review all existing employment contracts to ensure probation clauses are clearly drafted, limited to six months, and include provisions for formal structured reviews.
- Update your SSP policies to reflect Day 1 eligibility from 6 April.
- Verify your parental and paternity leave policies reflect the new day-one rights.
Short-Term — Before October 2026
- Implement or review your sexual harassment prevention policy.
- Ensure training covers harassment by third parties — clients, suppliers, and customers — not only colleague-on-colleague incidents.
- Document all reasonable steps your business has taken to prevent harassment.
- If you operate in hospitality, create and consult on a tipping policy before October.
Medium-Term — Before January 2027
- Train managers in conducting fair, documented, and timely probationary reviews.
- Audit any fire-and-rehire clauses in contracts — largely unenforceable from January 2027.
- Build a culture of structured performance documentation from day one of each employment.
Key Questions Answered
Q: When does the Employment Rights Act 2025 come into force in the UK?
A: The Act received Royal Assent in December 2024. Implementation is phased: first changes from 18 February 2025, with major employer-facing changes from 6 April 2025. The most significant change — reducing unfair dismissal protection to six months — takes effect from January 2027.
Q: Does the Employment Rights Act 2025 apply to small businesses?
A: Yes. There is no minimum employee threshold. The Act applies to all UK employers, including those with just one employee.
Q: What is the new unfair dismissal rule in 2027?
A: From January 2027, employees gain the right to bring an unfair dismissal claim after just six months of employment, down from the current two years. Compensation caps will also be removed, making financial exposure open-ended.
Q: What is the Fair Work Agency UK?
A: The Fair Work Agency is a new government body established from 7 April 2025 with powers to inspect workplaces and fine employers for breaches of holiday pay, statutory sick pay, and the National Minimum Wage.
