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Employment Rights Act

The Employment Rights Act 2025 (ERA) received Royal Assent and became law at the end of last year. This capped the end of a long journey, with the government consulting business and trade unions on the measures to be included in the legislation. It is vital that businesses now focus on getting the detail right to ensure they are ready for the changes contained in the Act. Here we look at what’s in the Act and ask what businesses can do to prepare.

The Employment Rights Act

The Act aims to modernise workplace rights, strengthen worker protections and promote fair pay and flexibility in working lives. Key reforms include:

• Unfair dismissal protection from six months' service and the removal of the cap on compensation.
• Ban on zero-hours contracts and new restrictions on dismissal and re-engagement practices.
• Strengthened protections against harassment and reinstated protections for third-party harassment.
• Flexible working rights for employees to request flexible working from day one.
• Enhanced family leave entitlements and new rights to miscarriage leave.
• Reintroduction of the two-tier code on workforce mattes on outsourced contracts.
• Availability of paternity leave and unpaid parental leave from the first day of employment.
• Implementation of a Fair Pay Agreements process in the adult social care sector in England and social care sectors in Scotland and Wales.

What happens next?

• ERA will be delivered in phases across a two-year period. The government says this will ensure that employees and employers have time to plan and prepare.
• The majority of the Act’s regulations will commence on 6 April or 1 October this year.
• The first measures repeal previous legislation and restore workers’ ability to take industrial action without excessive legal barriers.
• Rights to statutory sick pay and paternity leave, and the launch of the Fair Work Agency, will begin this April.
• The government has published a roadmap setting out expected implementation plans for all measures within ERA. It says it remains committed to the timelines in the roadmap and will provide further updates and support during 2026.

Significant shift

ERA marks a significant shift in employment rights and the rights of trade unions and it has been a key pillar of the government’s agenda.

It was achieved through the process of consultation and compromise on the key issues around the early stages of employment.

This approach will continue to be needed on the many details still to be worked through that will now be part of secondary legislation, according to Peter Cheese, Chief Executive of the Chartered Institute of Personnel and Development (CIPD), the professional body for HR and people development.

Clarity for employers

Cheese says: ‘It now provides clarity for employers and sets a timeline for businesses to prepare for the many changes, and in reviewing key people management practices and policies, some of which must start now.

‘With so much change, it will be crucial for the government to provide clear advance communication, alongside practical guidance and support for employers. And to provide this in good time, particularly for smaller organisations that don’t have in-house HR support.’

Long journey

The UK’s business groups have played a key part in consultations for ERA. They say that although it has been a long journey, there is still a considerable distance to go.

Now the Act has become law, businesses, the unions and the government must focus on getting the detail right, to ensure everyone is ready for the coming changes. Crucially, this will include consultation on the secondary legislation, which will govern much of the day-to-day practicalities of employment rights.

Major concerns

Kate Shoesmith, Director of Policy at the British Chambers of Commerce (BCC), says: ‘Businesses are clear they still have major concerns about the workability and costs of several other powers in the Bill.

‘These include issues relating to guaranteed-hours contracts, seasonal and temporary workers, thresholds for industrial action, and the practical application of union rules.

‘It is hugely important that workable agreements are found through further discussions, using the tripartite model that led to the compromise on unfair dismissal.   

‘Businesses, especially smaller ones, will need a lot of support and guidance from government to make sure they get this right and have the correct policies and processes in place.’

Billions in benefits

The Trades Union Congress (TUC) has welcomed ERA, claiming it will help to deliver an estimated £10 billion boost to the UK economy.

An updated government impact assessment suggested that the changes to employees' rights will prove to be 'significantly positive for society', with 18 million workers directly benefitting from improved working conditions and enhanced job security.

The government said that the reforms will help to boost living standards, improve health and wellbeing and assist more people to stay in work.

Paul Nowak, General Secretary of the TUC, commented: ‘Too often in this debate the facts are ignored. But stronger rights at work are good for workers and employers – driving up labour market participation, improving health, raising productivity and boosting demand.’