UK Employment Rights Act 2025—taking a measured approach

Today, the Employment Rights Act 2025 became law after receiving Royal Assent. While this is a significant milestone, most employers do not need to make immediate changes for the most part. 

The Government will implement the Act’s measures in phases, with many details still subject to consultation and future regulations. Most reforms are not yet in effect, and at least 26 further consultations are expected to clarify operational details. Because many provisions require additional consultation or secondary legislation, the practical impact and requirements remain unclear. 

Implementation will be staggered, with key reforms being rolled out in stages over the period to 2027.  

Short-term industrial relations changes

A limited set of industrial relations-related changes are already in effect or will take effect in the near future. 

The Strikes (Minimum Service Levels) Act 2023 is repealed from today, meaning that employers in key public service sectors will no longer be able to require staff to work during strikes to maintain minimum service levels. 

From around February 2026, some Trade Union Act 2016 restrictions will be lifted, simplifying and reducing the information and reporting conditions for industrial action, and extending the mandate for industrial action to 12 months. Workers will also have automatic unfair dismissal protection during and after lawful industrial action, with no 12-week limit.

These targeted changes generally do not require most employers to update contracts or policies now, but it is important to ensure industrial relations strategies reflect the new legal position and to stay informed about further union-related measures that may increase union recognition requests.

Unfair dismissal

After weeks of parliamentary ping pong, the Government was forced to strike a compromise so the Employment Rights Bill could pass into law before Christmas. The original plan for “day one” unfair dismissal rights was dropped in favour of reducing the existing two-year qualifying period to six months.

As part of the compromise, two significant changes were introduced:

• Earlier start date: The new rules will apply to dismissals on or after 1 January 2027 (not October 2027). In practice, someone hired in July/August 2026 with at least six months’ service as at 1 January 2027 will have unfair dismissal protection.
• No compensation cap: The current compensatory award cap (the lower of 52 weeks’ pay or GBP118,223) will be removed, making unfair dismissal compensation uncapped, like discrimination and whistleblowing claims.

The removal of the cap will benefit high earners most. Tribunals will still assess losses on a “just and equitable” basis, but this change makes it even more important to ensure the dismissal process is robust and fair.  

Further detail of this last-minute change is expected when the Government publishes an impact assessment. 

Other areas of reform and next steps

A wide range of other employment law reforms will follow under the Act, including new limits on “fire and rehire” and zero-hours contracts, “day one” parental leave rights, enhanced union measures, and gender pay gap and menopause action plans. According to the Government’s July 2025 roadmap, implementation will be phased into 2027 to allow for consultation and preparation. It remains to be seen if this timetable will be revised.

To assist with planning and implementation, we will be providing themed tables in the coming weeks which will analyse the key changes in each area, the timeline and any steps which will stand you in good stead. We will also keep you updated as further details emerge.

A&O Shearman UK Employment Team

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