7 | 2027 starts now: managing dismissal risk and harassment duties under the ERA
By Charlotte White, Ellie Gelder and Charlotte Reid
What is happening? (in a nutshell)
The Employment Rights Act (ERA), which is being implemented on a phased basis throughout this year and into 2027, will transform the UK employment landscape, introducing over 25 sweeping reforms to individual and collective employment law rights.
We highlight two key areas of importance for professional practices, which will have profound implications for risk, compliance and workforce management.
Strengthened unfair dismissal protection
Currently, employees must have two years of qualifying service to bring an ordinary unfair dismissal claim. The ERA will reduce this qualifying period to six months, although “day one” protection will continue to apply in cases of discrimination and automatically unfair dismissal. This change will apply from 1 January 2027 and is expected to operate retrospectively, meaning that an employee with six months’ service on that date would qualify (see Key dates for your diary below).
The ERA will also remove the compensation cap for unfair dismissal claims (currently the lower of one year's pay or £123,543). This change will also apply from 1 January 2027.
Harassment and whistleblowing reforms
Since 26 October 2024, employers have been obliged to take reasonable steps to prevent sexual harassment by their employees in the course of their employment. The ERA amends the wording of ‘reasonable steps’ to ‘all reasonable steps’, which proposes a significantly more onerous duty on employers. Regulations will specify what those ‘reasonable steps’ may be, to help determine whether an employer has taken all reasonable steps to prevent sexual harassment. These regulations are expected in 2027, although given the anticipated implementation date of the substantive reform is 1 October 2026, it is hoped that employers will be given further guidance before then.
Also from 1 October 2026, the ERA extends the duty to prevent harassment on the basis of any protected characteristic (including sexual harassment) of employees by third parties, for example clients, suppliers, and members of the public. This proposal has sparked significant concern across many sectors, for example regarding the practicalities of effectively investigating verbal or physical harassment by clients.
In addition, the ERA provides that non-disclosure agreements (NDAs), also known as “gagging clauses”, are void in so far as they purport to prevent the worker making an allegation or disclosure of information relating to certain work-related harassment – which includes sexual harassment – and discrimination. Regulations are expected to set out further details, including whether and in what circumstances NDAs will be permitted.
How might it impact your business?
Increased litigation risks
The unfair dismissal reforms are expected to trigger a sharp increase in employment tribunal claims, with an additional 6.3 million employees coming into scope. The requirement for six months' service to have been completed by 1 January 2027 means that anyone in employment now (July 2026) will have the right to bring an unfair dismissal claim from January – even if they have just started work. Likewise, the harassment and whistleblowing reforms are likely to cause an uptick in claims – as is the fact that from 1 October 2026 claimants will have six months to bring a claim in the Tribunal - rather than the traditional period of three months.
The latest employment tribunal statistics reported that the single claim open caseload increased in 2025/26 by 55% – compared to the same period in 2024/25. These reforms may well trigger a further backlog in the already buckling tribunal system and increased delays for claims to be heard.
Tracking key dates, organising check-in meetings and recording evidence remain critical in defending any claim. Recording and retaining evidence is particularly critical given the lengthened time limit to bring a claim – and the likely delay before any hearing would take place.
Settlement negotiations
For the first time, the removal of the compensatory cap will open the door for highly paid individuals to claim higher amounts for simple unfair dismissal claims. Previously, such claimants would have had to bring a successful whistleblowing or discrimination complaint to claim an award for unlimited compensation.
Under the ERA reforms, these individuals will now be able to expand their compensation for a successful unfair dismissal claim to include full salary, bonus payments and other benefits – effectively, “loss of chance” arguments that we haven't previously seen in this arena.
As a result, it is expected that employees on higher salaries may pursue higher value claims that would otherwise have been limited by the cap, meaning that settlement negotiations could become more complex and protracted.
Additionally, the ban on NDAs may discourage parties to settle, particularly (but not exclusively) employers if there is no way for them to ensure confidentiality. Whilst the NDA ban is still subject to consultation, it is likely to prevent businesses including requirements in settlement agreements to keep the reasons behind the settlement confidential - unless requested by the employee.
Renewed focus on workplace culture
The ERA's harassment reforms underline the need for all firms to proactively encourage a “Speak Up” and open culture. This aligns with the regulatory approach in financial services, with the expansion of the COCON rules from 1 September 2026 to prevent non-financial misconduct in a wider range of FCA-regulated businesses.
Key to all businesses will be culture, thorough investigations of issues and maintaining and promoting psychologically safe working environments. Any recommendations arising from investigations should be acted upon. Staff training, effective whistleblowing mechanisms and routine risk assessments will be key. If professional practices can maintain positive cultures, stamping out discrimination and harassment not only improves compliance with the harassment reforms – it also reduces the business risk arising as a result of the ban on NDAs. For more information, listen to our Work Couch podcast on Creating a Speak Up culture.
Changes to hiring and probation
The unfair dismissal changes are likely to impact recruitment decisions and workforce planning. Firms will look to build in pre-emptive ways of reducing the risks of hiring inappropriate candidates in the first place.
Probation periods will need to focus more closely on performance management, for example by setting objectives, providing feedback, and documenting concerns. It will also be key to ensure that probation periods do not automatically extend beyond the six month window, requiring managers to ensure that they strictly observe timelines.
What action should you consider?/Practical tips for firms
Monitor developments
Assign responsibility for tracking legislative updates and secondary legislation, ensuring your organisation is ready to adapt as details are clarified. To keep up to date with all the latest developments on the reforms outlined above, as well as the numerous other reforms introduced by the ERA, sign up to and bookmark our handy ERA tracker – a free resource, packed with practical tips and need-to-know information on each reform.
Consultation engagement
Engage with upcoming government consultations and opportunities to provide stakeholder perspectives, especially on the reforms relating to unfair dismissal, to ensure that the auditing and accounting sector's voice is heard.
Scenario planning
Assess the impact of the reforms and plan for potential increases in employment tribunal claims.
Prepare for audit
Depending on the final detail of the legislation, prepare to review all employment contracts, settlement agreements, and HR policies for compliance gaps.
Educate HR teams and line managers
Prepare to update documentation and train HR teams and managers on the new legal landscape, particularly around harassment prevention and dismissal processes.
Key dates for your diary
- 1 July 2026: Employees hired from 1 July 2026 will reach six months’ service and are expected to come into scope of the strengthened unfair dismissal protections, which are coming into force on 1 January 2027.
- 1 September 2026: COCON rules expanded to prevent non-financial misconduct in a wider range of FCA regulated businesses.
- 1 October 2026: Extension of time limit for tribunal claims from three to six months.
- 1 October 2026: Strengthened duty to prevent sexual harassment comes into force – employers to take all reasonable steps.
- 1 October 2026: Obligation on employers not to permit harassment on any grounds, including sexual harassment, of their employees by third parties comes into force.
- 1 January 2027: Qualifying period to bring an unfair dismissal claim will reduce from 24 months to six months.
- 1 January 2027: Removal of compensation cap for unfair dismissal claims.
There are many more key dates for your diary in relation to the ERA. Please sign up to our ERA tracker to see all anticipated implementation dates in one place and read summaries of what each legislative reform means, plus watch outs.
