Employment Rights Act 2025 — what do employers need to do?

The Employment Rights Act 2025 is the biggest shake-up in UK employment law for years. It's rolling out across 2026–27 and it will change how you handle dismissals, family leave, flexible working and more – especially if you run a small business.

You do not need to rewrite your entire HR world overnight. But you do need a clear plan to update contracts, policies and processes so you're not caught out when claims start landing under the new regime.

The big headline: unfair dismissal rights after six months, with no cap

The bit that should get your attention is the unfair dismissal reform. Under the Employment Rights Act 2025:

• The qualifying period for ordinary unfair dismissal will reduce from two years to six months.
• The statutory cap on unfair dismissal compensation will be removed, meaning awards are no longer capped at the lower of the statutory maximum or a year's pay.
• The power to vary the qualifying period by secondary legislation is removed, so future governments can't quietly toggle it up and down.

From 1 January 2027:

• Employees who have six months' service will have protection against ordinary unfair dismissal.
• Because of the "commencement approach", people who start work as early as July 2026 will gain protection on 1 January 2027 if still employed.

What this means in practice for dismissals

The old "they've been here less than two years, so we can just let them go" comfort blanket is gone. Practically, this means:

• You need fair, documented processes even for people with 6–12 months' service, not just long-servers.
• Performance, conduct and sickness dismissals all need clearer records of warnings, support and fair procedures.
• Your managers must stop assuming that service length = no risk.

You also need to be much more careful about how you discuss dismissal internally. With more tribunal activity and bigger awards, the content of your emails and HR notes matters – especially where legal privilege may or may not apply.

For practical guidance on how to dismiss for poor performance under the new rules, see our dedicated guide.

Day-one family rights from April 2026

From April 2026, the Employment Rights Act 2025 brings in day-one rights for certain types of family leave. Key changes include:

• Statutory paternity leave becomes a day-one right (no 26-week qualifying period).
• Unpaid parental leave also becomes available from day one, rather than after a year's service.
• More flexible rules around how and when paternity leave is taken.
• Further reforms around bereavement leave and strengthened maternity protections are expected from 2027.

For employers, that means:

• Your contracts and handbooks must reflect day-one rights, not outdated service thresholds.
• Line managers need to understand they can't say "you haven't been here long enough" for these types of leave.

If you're managing absences under the new regime, see our guide on managing sickness absence with new SSP rules and day-one protections.

Stronger expectations around flexible working refusals

Employees already have the right to request flexible working from day one. The Employment Rights Act 2025 tightens the expectations on how you refuse those requests. Under the new regime:

• You can still only refuse for one of the eight statutory business reasons – but the refusal must be reasonable.
• You must explain clearly what the ground for refusal is and why it is reasonable in your specific context.
• Poorly justified refusals are more likely to be challenged, and the risk of discrimination claims (e.g. around childcare, disability) is rising.

In other words, you can't just say "doesn't work for the business" and hope that's enough. You need a thought-through process, consistent decisions, and written explanations you'd be happy to see again in a claim file.

Sexual harassment and the "all reasonable steps" duty

Alongside the ERA 2025, the duty on employers to take "all reasonable steps" to prevent sexual harassment at work is being strengthened, with reforms expected to bite in late 2026. In practical terms this means:

• You'll be judged not just on how you respond to harassment complaints, but on how you prevent them.
• Policies, training, reporting routes and how seriously you treat early warning signs will all be under the microscope.
• NDAs and settlement agreements cannot be used to gag genuine harassment allegations.
• Harassment and discrimination claims already carry higher average awards than unfair dismissal and are trending upwards.

What small employers actually need to do now

You don't need a 50-page change programme. You do need a realistic plan to catch up with the law before it catches up with you. In the next 6–12 months, focus on:

Contracts and offer letters

• Remove outdated references to two-year qualifying periods for certain rights.
• Update family leave sections to reflect day-one rights under ERA 2025.

Handbook and core policies

• Disciplinary and capability: make sure they support fair processes for under 2-year service staff.
• Family-friendly: update for ERA 2025 changes and signpost clearly to staff.
• Flexible working: build in the new "reasonable refusal" standard and documentation.

Manager training

• Train managers on performance, sickness, grievance and flexible working under the new rules.
• Make sure they know when to pause and get advice, not improvise.

Privilege-aware communications

• Stop sensitive HR/legal strategy being thrashed out in messy email chains with non-lawyer providers.
• Where appropriate, route legal strategy discussions through a practising solicitor so you have a credible argument for legal professional privilege.

If disputes do arise, handling grievances fairly under the ACAS Code is a critical part of your risk management.

How Electra HR can help you get ERA 2025-ready

Electra HR is designed for exactly this kind of change: small employers who need practical HR updates with proper legal backup. Because we're powered by Bonsai Law, an SRA-regulated firm, we can:

• Review your contracts and handbook against the Employment Rights Act 2025 changes.
• Prioritise what has to change now versus later, based on real risk and your sector.
• Support you in performance, dismissal, grievance and flexible working cases under the new rules, with solicitor-level input and a clear route to privilege where needed.

You get one joined-up view of HR and law, rather than a consultancy telling you one thing and a law firm tidying up afterwards. To get your contracts and policies ERA 2025-ready, see what's included in our services.

If you're thinking about structural changes at the same time — for example, making someone a director in the new regulatory environment — it's worth considering the ERA 2025 backdrop alongside your corporate decisions.

The simplest next step is to book an Employment Rights Act 2025 readiness check so we can tell you exactly where you stand.