Employment Rights Act 2025: What Employers Need to Know
The Employment Rights Act 2025 represents one of the most significant reforms to UK employment law in decades. The legislation introduces a number of new employment rights, including changes to statutory sick pay, family leave rights and workplace protections.
However, the change expected to have the greatest impact on employers is the reduction of the qualifying period for ordinary unfair dismissal claims from two years to six months.
For businesses, this means recruitment, onboarding, probation management and performance review processes may need to be reviewed well before the changes take effect on 1 January 2027.
This guide explains what is changing, when the new rules take effect and the practical steps employers should take to reduce legal risk.
Employment Rights Act 2025 at a Glance
Key Change
Current Position
New Position
Qualifying period for unfair dismissal claims
2 years
6 months
Compensatory award
Capped
Removed from January 2027
Statutory Sick Pay waiting period
3 days
Removed
What Is Changing?
The climate in which businesses have been operating has become increasingly challenging over recent times. Businesses have cited many difficult factors, including unanticipated rises in national insurance contributions and increased business rates/energy costs.
Within this environment, the Employment Rights Act 2025 (ERA 2025) has also started to come into force in stages. We have seen that there is no longer (for example) a three-day “waiting” period for statutory sickness pay, and paternity and parental leave have also become “day 1” rights.
However, the most significant change looks certain to be;
The scheduled reduction in the required service for employees to bring a claim for (ordinary) unfair dismissal from 2 years to 6 months.
Another significant change is that the limit on the compensatory award, for “ordinary” unfair dismissal claims, will be removed (1 January 2027). This will mean that higher paid employees will be more likely to bring claims in the Employment Tribunal where, previously, they would not have (because the statutory cap was fixed so far below their earnings). This is another key change that is likely to place an even greater premium on receiving early expert advice.
This, along with a host of other changes, is why experts have described the ERA 2025 as the most significant piece of employment legislation in decades.
Why Is Reducing the Qualifying Period to Six Months So Significant?
For a number of years, businesses have had the relative luxury of having almost 2 years, taking account of the applicable statutory notice period, to assess whether or not an employee’s employment might extend beyond this point. While legislation does provide a variety of employment rights and associated claims for employees, unfair dismissal is arguably the key employment law right. Employers have, until now, been able to dismiss within the first 2 years (with little process) where concerns arise around:
- Performance
- Capability
- Conduct
- Attitude
- Suitability for the role
Provided there were no other apparent claims, such as discrimination or whistleblowing, which are day one rights.
The reduction of the qualifying period to six months significantly shortens the time available to assess new employees and increases the importance of robust recruitment and probation management processes.
When Do the New Unfair Dismissal Rules Come into Force?
The changes will take effect on 1 January 2027.
Any employee who has at least 6 months’ service (as of 1 January 2027) will have qualifying service to bring a claim for (ordinary) unfair dismissal.
It’s currently estimated that nearly a quarter of the UK workforce has between 6 months and 2 years’ service and will therefore benefit from this change, overnight. This, in addition to all new employees, who will only have to wait 6 months to acquire the right to claim unfair dismissal.
Practical Steps Employers Should Take Before January 2027
If you have recruitment/staffing responsibilities within a business, the biggest single thing to consider is a review of your current probation period clauses and any related practices.
Review Existing Probation Periods
- If you don’t currently use probation periods, then it is recommended that your business put this in place.
- If your probation periods are currently 6 months, it is recommended you shorten this period to 3 months, with the ability to extend for a further one or two months (if necessary).
- Employers should think of the absolute maximum time they have to decide on an employee’s suitability as 5 months and 3 weeks, as the statutory one week’s notice needs to be factored in.
Introduce Greater Structure
More formal and structured probation management is recommended, including:
- Recording key dates
- Holding mid-probation review(s)
- Documenting performance discussions
- Avoid delaying any “difficult” conversations
- Keeping records of concerns and support provided
- Confirming expectations and objectives
This helps manage employee expectations and ensure appropriate records are held (particularly where a probation period may prove unsuccessful). Allowing employers to demonstrate that any termination, within the first 5 months and 3 weeks, is for an appropriate reason.
Maintain Records Beyond Probation
These principles will also apply where an employee is retained beyond 6 months. So, if the timing slips and an employee is later found unsuitable, businesses will still (of course) need to evidence the review process performed and associated records kept. And this will be even more crucial for dismissals after 6 months’ service, given the qualifying service threshold will have been crossed. Either way, keeping appropriate records will help show that dismissal was for the reasons recorded by the business and not some other reason (that could found another possible claim).
Review Employment Contracts and Policies
The relevant contract of employment should therefore appropriately narrate the probation period and, for example, any notice period within. In addition, this should be followed up in the first few days of employment (including any appropriate paperwork) to ensure there’s a clear understanding of what this period entails.
However, it’s important that any added formality does not undermine a positive environment, allowing new starts to settle in and appropriate judgements (from both sides) to be made.
Key Takeaways for Employers
While businesses have a lot to navigate at the moment, it is crucial that this significant change does not slip under the radar. This, to hopefully prevent a great deal of avoidable time and expense (and legal exposure) with associated claims. Any relevant probation periods ought to be re-framed immediately (with appropriate advice), given that anyone with 5 months and 3 weeks’ service (as at 1 January 2027) will benefit from this change.
What Else Is Changing Under the Employment Rights Act 2025?
As indicated, the ERA 2025 also includes changes to statutory sickness pay and certain “family friendly” rights (not just relating to paternity and parental leave). In addition, further obligations are coming in with respect to employers preventing (sexual) harassment, which will also require updates to related policy documents (and Staff Handbooks). Other staff policy updates, unrelated to the ERA 2025, include new rights concerning neonatal leave (and pay) and carers leave.
For these reasons, there has never been a better time to do a full review/audit of your contract of employment templates and overall Staff Handbook (as well as any other materials relevant to probation periods).
Frequently Asked Questions About the Employment Rights Act 2025
When does the Employment Rights Act 2025 unfair dismissal change take effect?
Employees with at least six months’ continuous service on 1 January 2027 will be eligible to bring an ordinary unfair dismissal claim.
What is the current qualifying period for unfair dismissal?
At present, most employees require two years’ continuous service before they can bring an ordinary unfair dismissal claim.
How will the Employment Rights Act affect probation periods?
Many employers are reviewing probation periods to ensure employee suitability can be assessed and documented before six months’ service is reached.
Can employees still bring claims before six months?
Yes. Certain claims, including discrimination, whistleblowing, and some automatically unfair dismissal claims, remain day one rights.
What should employers do now?
Employers should review contracts of employment, probation procedures, staff handbooks, performance management processes and HR documentation before the changes come into force.
Need Advice on Preparing for the Employment Rights Act 2025?
The Employment Law team at Miller Samuel Hill Brown LLP can help employers review contracts, probation procedures, staff handbooks and workplace policies to ensure compliance with the upcoming changes.
To discuss how the Employment Rights Act 2025 may affect your business, contact our Employment Law team on 0141 221 1919 or email employment@mshblegal.com.
