8 | A closer look at the Employment Rights Act 2025
What is happening?
The Employment Rights Act 2025 (ERA), which received Royal Assent on 18 December 2025, will transform the UK employment landscape, introducing over 25 sweeping reforms to individual and collective employment law rights. The reforms are expected to be implemented on a phased basis, from soon after Royal Assent through to the end of 2027.
We highlight three key areas of importance for consumer brands and retailers, 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).
The ERA will also remove the compensation cap for unfair dismissal claims (currently the lower of one year’s pay or £118,223). We await confirmation on commencement, but this change is currently anticipated to 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.
The ERA also extends the duty to prevent harassment, including sexual harassment of employees by third parties, for example customers, clients, suppliers, and members of the public. This proposal has sparked significant concern across the consumer brands and retail sector, for example regarding the practicalities of effectively investigating verbal or physical harassment by customers (anticipated implementation date of 1 October 2026).
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.
Finally, the ERA provides that where a worker makes a disclosure that sexual harassment has occurred, is occurring, or is likely to occur, such a disclosure will expressly be recognised within the categories of wrongdoing that can form the basis of a qualifying disclosure for the purposes of whistleblowing protection (anticipated implementation date of 6 April 2026).
Guaranteed hours for zero hours and agency workers
The ERA introduces a statutory obligation for employers to offer guaranteed hours to (i) zero hours workers and (ii) “low hours” workers whose actual hours worked exceed the low number of guaranteed hours stated in their contracts during a relevant reference period. The intention of this reform is to address insecure working patterns, especially for zero-hours and low-hours contracts.
Qualifying workers (which includes agency workers) will also be entitled to reasonable notice of a shift or of any change to or cancellation of a shift, with employers required to pay workers compensation for any change or cancellation at short notice.
These reforms are anticipated to come into force at some point in 2027, although the exact date is yet to be confirmed.
increase in cases proceeding either to Acas early conciliation or to the employment tribunal (source here)
additional employees will come into scope of the strengthened unfair dismissal protection introduced by the ERA (source here)
additional employment tribunal claims expected due to unfair dismissal reforms alone (source here)
workers expected to gain the right to make a claim following the reforms to zero hours contracts (source here)
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. Likewise, the harassment and whistleblowing reforms are likely to cause an uptick in claims. This may create 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.
Settlement negotiations
Removal of the unfair dismissal compensation cap could prompt employees on higher salaries to pursue higher value claims that would otherwise have been limited by the cap, meaning 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.
Changes to hiring and probation
The unfair dismissal changes are likely to impact recruitment decisions and workforce planning. Consumer brands and retailers 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.
Seasonal workers
The introduction of guaranteed hours offers (GHOs) for zero hours and agency workers is problematic because it is not yet clear how employers can comply with the new rules in practice. For example, there is currently no definition of “low hours” for the purposes of the GHO requirement.
Given seasonal working is frequently relied on by consumer brands and retailers, the hours threshold and reference period are crucial points of contention and employers should engage with the consultation on these key definitions.
What action should you consider?
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 and guaranteed hours, to ensure that the consumer brand and retail sector’s voice is heard.
Scenario planning
Assess the impact of the reforms, for example reduced flexibility in workforce management, particularly for seasonal and variable-hours staff, 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. For example, in respect of zero hours and agency workers, ensuring that HR and payroll processes are adapted to measure and record the regularity and pattern of hours worked.
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
6 April 2026
Whistleblowing protections extended to include sexual harassment as a qualifying protected disclosure. Watch our video below to find out more.
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 October 2026
- Strengthened duty to prevent sexual harassment comes into force – employers to take all reasonable steps.
- Obligation on employers not to permit harassment, 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.
- Removal of compensation cap for unfair dismissal claims. This change is currently anticipated to apply from 1 January 2027.
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.
