Catriona Aldridge

Here are some of the key headline changes that will impact employers under the new legislation.

Unfair dismissal

In a significant concession to its manifesto commitment, the government agreed that the right to bring an unfair dismissal claim will not become a ‘day one’ right. Instead, the qualifying period to bring such a claim will be reduced from the current two-years to six months. 

It seems likely that this right will be brought into force in January 2027. If so, employees joining a company from 1 July 2026 could benefit from this enhanced protection, so careful planning and changes to probationary policies and performance management processes will be needed during the first half of 2026.

Removal of the cap on compensatory awards

While the timing for implementation is still uncertain, the Act will remove the limit on compensatory awards for successful unfair dismissal claims which is currently the lower of 52 weeks’ pay or £118,223. This will have a significant impact on dismissals of high-earning staff and will materially alter the cost and risk profile of senior exits.

Longer limitation period

The Employment Rights Act also extends the time limit for bringing most types of claims in employment tribunals, from three months to six. This will likely result in more tribunal claims in a system that is already heavily stretched, although the government’s hope is that this will be eased by the recent extension of the Acas Early Conciliation period from six weeks to 12. 

Collective redundancy consultation

Collective redundancy consultation triggers are also addressed in the new Act. In addition to the ‘20 or more at one establishment’ test a second, standalone trigger will be introduced.

Collective consultation will be required when a threshold number of employees, to be set out in forthcoming regulations, are proposed to be made redundant across an employer’s business. There will also be an increase in financial penalties from April 2026 enhancing the risk for non-compliant employers.

Fire and rehire

Fire and rehire changes mean that, other than in circumstances of an employer’s serious financial difficulty, where employees refuse to agree to certain changes to their terms and conditions it will be automatically unfair for their employer to dismiss them as a result, even if they offer to re-engage on the new terms.

The fire and rehire provisions, expected to be introduced in October 2026, also prevent employees from being dismissed and replaced with self-employed contractors, agency workers, or any other non-employees to do substantially the same work.

Zero hours contracts

Zero hours contracts will not be banned as part of the new Act but instead a complicated system where employers must offer guaranteed hours if certain conditions are met has been created.

There are also new rules around giving notice of shift changes and cancellations. While much of the detail is yet to be developed, with final rules not expected until 2027, this will have a significant impact in sectors such as hospitality, retail and social care, which have traditionally relied on zero hours and fixed term contracts as well as variable shift patterns.

Trade union rights

As well as introducing an obligation on employers to inform workers of their right to join a trade union, the Act also gives listed trade unions a new statutory right to access workplaces.

The current requirement for a trade union to have a minimum of 10% of workers in the proposed bargaining unit as members before it can apply for statutory recognition is also to be reduced. Although the new threshold is yet to be agreed (there is a consultation currently underway on this matter), the TUC is pressing for the lowest possible threshold of 2%.

The Act also removes the initial threshold of 50% of trade union members to have voted to strike. It will become easier to call industrial action as only a simple majority of those voting must vote in favour of industrial action. A government consultation will inform the details behind these proposals which are expected to take effect in 2027.

Statutory sick pay and family leave

The Act introduces a ‘day one’ right to paternity leave and unpaid parental leave, and removes the lower earnings limit and three-day waiting period for statutory sick pay. These changes will apply from April 2026.

Flexible working

Key changes to existing rules, expected to be implemented in 2027, will mean an employer will only be able to refuse a flexible working request where it is reasonable for them to do so. They will also be required to set out the grounds for the refusal.

Equality

By 2027, employers with 250 or more staff will be required to publish an equality action plan setting out how they are addressing the gender pay gap and supporting employees going through the menopause.

The Act will also reintroduce rights for a worker to bring a claim against their employer if a third party harasses them in the course of their employment and the employer has failed to take all reasonable steps to prevent this.

Further measures will increase the duty to prevent sexual harassment in the workplace by requiring employers to take all reasonable steps to do so. Regulations specifying what amounts to reasonable steps are expected in 2027.

Ban on non-disclosure agreements

While there is no timetable yet for its implementation, the Act contains a ban on employers using confidentiality clauses which prevent a worker from making allegations or disclosures about harassment or discrimination.

Managing change

The Act means significant change lies ahead for UK employers, but its measures will be implemented in stages meaning careful planning will assist in making it more manageable for businesses.

CMS invites employers to join us for our two-part webinar series on 13 and 22 January 2026 where employment specialists will outline what businesses need to know, what action they need to take and when.

Catriona Aldridge is a partner and employment law specialist at CMS