Employment Law Digest June 2026: Employment Rights Act 2025, what’s changed so far and what’s next?

While many of the reforms are being introduced gradually throughout 2026 and 2027, the changes already in force are beginning to reshape recruitment practices, employee relations, workforce planning, and organisational risk management.

For HR professionals, the challenge is not simply understanding the legislation itself, but managing its practical implications while preparing businesses for further changes still to come. So, what’s changed so far, what impact has it had, and what do we need to prepare for next?

What has changed so far?

Although the Employment Rights Act 2025 received Royal Assent in December 2025, implementation is taking place in phases. Several key reforms have already taken effect during 2026.

Day-One Statutory Sick Pay (SSP)

Employees are now entitled to SSP from the first day of absence, rather than waiting until the fourth day. The removal of the lower earnings threshold has also extended eligibility to many lower-paid workers who were previously excluded.

For employers, this has increased payroll costs and administrative requirements, particularly in sectors with traditionally high absence levels such as hospitality, retail, social care and logistics. Some employers have reported a general disinclination to recruit as a result of this change, which followed on the heels of the recent increases to national insurance for employers.

Day-one family leave rights

Paternity leave and unpaid parental leave have become day-one employment rights, removing previous qualifying service requirements. This reflects a broader policy objective of strengthening family-friendly workplace practices and supporting workforce participation.

Trade union and industrial action reforms

The first phase of trade union reforms has also commenced, including stronger protections for workers participating in industrial action. The previous limitations on unfair dismissal claims linked to industrial action have been significantly reduced.

Increased penalties for collective redundancy failures

The maximum protective award available where employers fail to comply with collective consultation requirements has doubled from 90 to 180 days’ pay. This substantially increases the financial risk associated with large-scale restructuring exercises.

What changes are still coming?

Many of the most far-reaching reforms are scheduled for implementation during late 2026 and throughout 2027.

Unfair dismissal reform

Perhaps the most closely watched change is the reduction in the qualifying period for ordinary unfair dismissal claims. This is the change that the majority of employers we speak to are saying will have the greatest impact on them and their business and it is fundamentally changing the approach a significant proportion of them are taking towards recruitment.

At present, employees need two years’ service before gaining protection against unfair dismissal. Under the Act, this will reduce to six months from January 2027. So, for anyone recruiting staff to start over summer, remember that those individuals will have protection from unfair dismissal once we get to January 2027.

This reform will significantly increase the number of employees able to bring claims and is likely to place greater emphasis on getting recruitment right, probation management, documentation, and performance processes.

Restrictions on “Fire and Rehire”

New protections restricting the use of dismissal and re-engagement practices are expected to take effect in January 2027. Employers will face much tighter controls when seeking to impose contractual changes through dismissal and re-engagement mechanisms, making it virtually impossible to do so safely, unless in very particular circumstances.

Expanded worker protections

Additional reforms relating to zero-hours arrangements, predictable working patterns, workplace harassment, and labour market enforcement are expected to continue rolling out over the next 18 months.

What challenges have emerged?

Rising employment costs

Many employers are experiencing increased labour costs resulting from expanded sick pay eligibility, compliance obligations, and enhanced employee protections.

For businesses already managing inflationary pressures, National Insurance increases, and rising wage costs, the cumulative financial impact has become a significant concern. Employer organisations have warned that some businesses may struggle to absorb these additional costs without reducing headcount or increasing prices.

Greater litigation risk

As employment protections expand, organisations face increased exposure to tribunal claims.

The forthcoming reduction in the qualifying period for unfair dismissal claims means employers will need to justify employment decisions much earlier in the employment relationship. HR teams will be expected to demonstrate robust evidence of performance management, misconduct investigations, and fair decision-making processes. This is set against the backdrop of an Employment Tribunal system that is already struggling to keep up with the current level of demand, with seemingly no coherent plans for how the increasing volume of claims will be efficiently managed.

Increased administrative burden

Many employers are finding that existing policies, contracts, onboarding processes and management training programmes require significant revision.

Organisations that have historically relied on informal people management practices may find themselves particularly exposed as legal protections strengthen.

Manager capability gaps

Line managers are increasingly at the forefront of employment risk. Poorly managed probation periods, inconsistent performance reviews, or inadequate record-keeping are likely to create greater legal exposure under the new framework.

As a result, many HR teams are prioritising manager capability programmes and employment law training.

Is the Act affecting hiring decisions?

The short answer is yes.

Business groups expressed concerns throughout the legislative process that stronger dismissal protections could discourage recruitment, particularly for small and medium-sized enterprises. These concerns contributed to the Government’s decision to move away from the originally proposed day-one unfair dismissal rights and instead adopt a six-month qualifying period.

In practice, some employers are already:

• Increasing scrutiny during recruitment processes.
• Extending and strengthening probation management procedures.
• Investing more heavily in assessment centres and pre-employment testing.
• Becoming more cautious about creating permanent positions.
• Reviewing the balance between permanent, temporary and contingent workforces.

While there is limited evidence that the reforms have caused widespread recruitment freezes, many employers are reporting increased caution when making hiring decisions, particularly where business demand remains uncertain.

What should HR professionals do now?

The phased nature of implementation provides organisations with an opportunity to prepare proactively rather than reactively.

Key priorities should include:

1. Review employment contracts

Contracts should be assessed against upcoming requirements, particularly in relation to probation periods, flexibility clauses, disciplinary procedures, and contractual variation provisions.

2. Strengthen probation management

With unfair dismissal protection moving to six months, organisations should ensure probation reviews are structured, documented and completed consistently.

3. Update policies

Sickness absence, family leave, grievance, disciplinary, redundancy and consultation policies should all be reviewed against the new legal framework.

4. Train managers

Many employment tribunal claims arise not because of policy failures but because managers fail to follow established procedures. Investment in manager training will be critical.

5. Audit workforce planning

Employers should evaluate whether their current workforce model remains fit for purpose in light of increased employment protections and compliance obligations.

6. Monitor future legislative developments

The Employment Rights Act 2025 remains a work in progress. Detailed regulations and guidance continue to emerge, and HR teams must stay informed as implementation progresses throughout 2026 and 2027.

Conclusion

The Employment Rights Act 2025 represents a fundamental shift in the balance between employer flexibility and worker protection. While the reforms aim to improve job security and workplace fairness, they also introduce new compliance obligations, increased legal risk, and higher employment costs for organisations.

For HR professionals, the focus should now be on preparation rather than reaction. Businesses that invest early in robust policies, effective management capability, and legally compliant employment practices will be far better positioned to navigate the next phase of reform and minimise disruption as further provisions come into force.

For further information, please speak to your usual adviser, or contact one of our employment lawyers.

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